The answer to this question can be found in the recent decision of Supreme Court in the case of Duval v 11-14 Randolph Crescent 18 UKSC [2020] (‘Duval’).
The case can be summarised as the answer to the question below:
Q: Can a landlord grant a consent to leaseholder to do works, when the lease contains an absolute prohibition against doing so?
A: If the leases are all in similar terms, contain the same absolute restriction and have a covenant by the landlord to keep the leases on similar terms, the answer is “no.”
Summary
The Supreme Court has held that that if a freeholder licensed a leaseholder to carry out alterations, despite an absolute prohibition contained in the lease against the alterations, then the freeholder was in breach of its obligation to enforce the lease covenants at the request of other leaseholders in the building.
Facts
The case involves a block of flats located at 11-13 Randolph Crescent in Maida Vale, London. The block had originally been two houses, now long since converted into nine flats each with a long residential lease. The freeholder of the block is 11-13 Randolph Crescent Ltd (the Landlord), a company that was owned by all the leaseholders of the block (sometimes informally referred to as a “share of Freehold”).
One of the leaseholders approached the Landlord asking for permission to carry out some alterations to their flat. These works included the removal of about seven metres width of load-bearing wall at basement level, and other works that would also have extended beyond flat in question.
The Landlord was willing to grant consent to these works. However, one of the other flat owners objected saying that the terms of the leases for the building prevented the Landlord from consenting.
The leases of all the flats contained, amongst other things, the following commonly used covenants:
- An absolute covenant by the tenant against carrying out work of this type (thus preventing any structural alterations); and
- A covenant by the Landlord that any lease granted of a residential unit at the building would be on similar terms and that at the request of a leaseholder the Landlord would enforce the covenants given by another leaseholder.
The objecting leaseholder (a Dr Duval) argued that the Landlord had covenanted to enforce the absolute covenant against certain works if requested to do so by another leaseholder. If the Landlord had consented to a breach of the alterations covenant, the Landlord would have put that breach beyond its own power to enforce and deal with, thus breaching the enforcement covenant.
The decision
The Supreme Court, in reviewing the arguments put to it and the decision in the Court of Appeal, took the view that it was not possible for the landlord to put itself in a position that was inconsistent.
In other words, if on the one hand if the landlord had given a covenant to keep all the leases on similar terms, then it could not with the other hand grant a consent to a leaseholder that would allow it to breach an absolute restriction contained in all the leases of the flats.
The Landlord was not free to simply ignore the absolute prohibition and give consent to the alterations.
The impact of this decision
Whilst this decision is ‘good news’ for flat owners who want on an individual or group basis to stop their freeholder (whether a leaseholder owned company or otherwise) giving consent to works if the leases have absolute restrictions of this sort, the case is not such good news for those wanting to do works to their leasehold property.
Freeholders will now need to consider matters very carefully if they are not to be exposed to the risk of litigation if the leases impose absolute restrictions against doing works.
Granting consent otherwise, could expose the Landlord to the risk of proceedings either for an injunction to stop the granting of consent or a claim for damages where consent has already been given.
This is in stark contrast to the practice that has been common until now of freeholders consenting to alterations regardless of whether the alteration clause in the lease is absolute or not, often in exchange for a premium.
If the lease clauses are absolute then unless all the leaseholders agree, it is now very unlikely that the landlord can grant a consent that flies in the face of this.
At Bishop & Sewell, we have more than 40 years’ experience in property with a particular focus on Landlord & Tenant.
Charlie Davidson is a Solicitor in our Property team, dealing with both residential and commercial property.
If you are thinking of buying a leasehold property, or if you already own a leasehold property and you have a question about obtaining a consent to alterations that you are planning please call 020 7631 4141 and ask for a member of the Property team, or email leasehold@bishopandsewell.co.uk.
The above is accurate as at 14 November 2020. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.
