On the 6 May 2020, the Supreme Court gave judgment in the case of Duval v 1113 Randolph Crescent Ltd which has potentially wide ranging implications for landlords of blocks of flats and their tenants.
Long leases of flats often contain a mechanism to ensure that there is consistency between the various leases within a building and a procedure to ensure that a tenant in one flat can take action against another tenant for breach of a tenant covenant if such a breach is causing harm.
In this case, the procedure was an agreement by the landlord to take action on behalf of one tenant against another tenant to enforce a breach of covenant if the complaining tenant paid the landlord’s costs of such action.
Mrs Winfield, lessee of one flat, wished to carry out works which would involve removing part of a load-bearing wall. This was prohibited under her lease, which contained an absolute covenant against “cutting or maiming…any roof wall or ceiling within or enclosing the demised premises”. She applied for a licence to the landlord, which the landlord was inclined to grant.
However another lessee in the block, Dr Duval, contended that to do so would be a breach by the landlord of the obligations it owed her. Dr Duval issued proceedings for a declaration that the landlord did not possess the power to grant the licence because, providing the lessee agreed to indemnify the landlord for the cost of doing, the landlord had promised to enforce the covenants in the lease at the lessee’s request. The question for the Court, therefore, was whether the grant of a licence by the landlord to Mrs Winfield would be a breach of its obligations to Dr Duval.
The Supreme Court conclusion was that granting such a licence would do so. Whilst the obligation for the landlord to take action against Mrs Winfield was conditional upon Dr Duval making a request to the landlord and, crucially, putting the landlord in funds to do, nevertheless the landlord could not deprive Dr Duval of her right to compel the landlord to take action by granting consent to Mrs Winfield before Dr Duval could take the necessary steps.
The consequences arising from this judgment are significant. Whilst this case concerned a breach of an absolute tenant covenant not to make material alterations to a property, the principles arising from the judgment can be applied to any breach of covenant however minor. It also potentially catches qualified covenants (being those covenants where a landlord’s consent must be obtained but such consent must not be unreasonably withheld or delayed) if any permission granted by a landlord is not strictly complied with.
The decision may also have implications for landlords who have granted consents in similar situations in the past where those decisions may now be open to challenge; albeit the damages in most situations are likely to be modest.
It will take a while for the full implications of this decision to come to light, but it is clear that a landlord’s decision making in managing blocks is restricted as a result of this decision. It also means that tenants have more power over both the landlord and, in real terms, over other tenants, and that power may not always be used for appropriate purposes.