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Landlords consent to alterations
Landlords and management companies who are asked to consent to the alterations that a leaseholder intends to undertake must now be careful not to fall foul of the ruling of the Court of Appeal in Duval v 11-13 Randolph Crescent Limited  EWCA Civ 2298.
Leases commonly prohibit alterations to a flat which will involve things like cutting into the walls or ceiling. Leaseholders who want to remodel their flat are therefore required to obtain the consent of their landlord or management company before undertaking such works – if they do not have that consent then they will be in breach of the lease covenant which prohibits alterations, and that could have some serious consequences for them.
It is frequently the case, however, that when a landlord grants a number of leases of flats in the same block, it covenants with each leaseholder that it will, firstly, grant leases of each flat in materially the same form and, secondly, will enforce the lease covenants against any leaseholder if another leaseholder requires it to do so. Under that arrangement, each leaseholder knows that everyone in the block must abide by the same set of rules and that, in the event of a breach, the landlord can be made to take enforcement action to remedy it.
Lawyers have long known that this arrangement appears to represent a risk for a landlord or management company which grants a licence to a leaseholder to carry out alterations which, without that licence, would be a breach of the leaseholder’s covenant. The problem is this:
- The landlord has covenanted with every leaseholder that each lease will be the same and will therefore contain the same covenant against alterations. It has further covenanted to enforce each covenant if requested to do so.
- That means that if leaseholder A carries out alterations in breach of its covenant, leaseholder B can make the landlord to take enforcement action against leaseholder A.
- But if the landlord gives leaseholder A a licence to carry out the alterations, then the landlord has prevented itself from taking enforcement action when leaseholder B requires it to do so.
- That means that the landlord is now in breach of its own covenant to leaseholder B who is without any remedy against leaseholder A.
However, there has always been an argument that once the landlord has licensed leaseholder A to carry out the alterations then carrying out the alterations is no longer a breach of the covenant. There is therefore nothing for leaseholder B to require the landlord to enforce.
The Court of Appeal soundly dismissed that argument last week in Duval.It made clear that where a landlord has promised to enforce a covenant, doing anything (such as granting a licence) which prevents it from enforcing that covenant will itself be a breach of the promise to enforce the covenant.
Whether landlords and management companies will be caught by this ruling depends on the wording of the lease in question. A close analysis of the covenants should therefore be undertaken before licences to carry out alterations are granted.
For advice contact John Wagstaffe.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.