Should Landlords Give their Consent to Leaseholders?

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Landlords are often asked to give their consent for a leaseholder to do something in their flat which the lease otherwise prohibits.  Landlords are often induced to grant that consent by the payment of a premium by the leaseholder.  The recent case of Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18 however highlights a very real risk in granting consents which landlords must be alive to.

In residential blocks of flats the leases frequently contain an obligation on the landlord to enforce, at the behest of one leaseholder, the terms of the leases of the other flats against the other leaseholders.  The reason for that is that what Leaseholder A does in his flat may well affect Leaseholder B above him.  But Leaseholder B is not a party to Leaseholder A’s lease so he cannot enforce its terms.  The landlord is however a party to all the leases so can enforce each of them against every tenant.  Leaseholder A can therefore ask the landlord to enforce Leaseholder B’s lease so as to prevent him from doing whatever it is that is having an impact on him.

 

There are two particular types of terms in leases with which we are concerned: absolute covenants and qualified covenants.

Absolute Covenant

An absolute covenant, as the name suggests, prohibits something absolutely. For instance, a covenant which said “No structural alterations are to be carried out in the flat” is an absolute covenant. There is no wiggle room.

Qualified Covenant

A qualified covenant however will prohibit something unless consent is given. A covenant which said “No structural alterations are to be carried out in the flat without the landlord’s consent” is a qualified covenant. There is some wiggle room – if the landlord consents then you can knock that wall down.

 

Since the leases envisage that consent may be given in relation to a qualified covenant, the landlord can generally grant consent without any risk.

A potential problem however arises when landlords are asked to give consent in the case of an absolute covenant. In theory, that covenant is given to the landlord so it is free to waive or modify it as it pleases. However, where the leases also contain the obligation on the landlord to enforce the terms of the other leases, the problem crystallises.

Returning to our absolute covenant prohibiting structural alterations, if the landlord grants consent for Leaseholder A to remove a wall following which Leaseholder B requires the landlord to enforce the absolute covenant against structural alterations, the landlord is stuck: he cannot enforce that absolute covenant against Leaseholder A because he has just granted consent to remove the wall. What then? The Court in Duval made clear that the landlord is then in breach of its covenant to Leaseholder B.

So by helpfully granting consent so that Leaseholder A could remove a wall without being in breach of his lease, the landlord has put himself in breach of all the other leases. What happens then? Well, it depends but it normally ends up being expensive for the landlord.

It is important to bear in mind that this principle applies to all manner of lease covenants ranging from making structural alterations to keeping pets.

When asked to give consent, landlords therefore need to ask themselves two questions:

  1. Is this an absolute or a qualified covenant? And,
  2. Do I owe a duty to the other leaseholders to enforce the terms of this lease?

If the answer to both questions is yes then the landlord should not grant consent, at least not without obtaining legal advice first.

 

If you are a leaseholder or landlord and need advice about a lease, please 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.