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Can a landlord grant a licence to change a lease or carry out works which would otherwise be a breach?

Posted: 30/06/2020

Housing associations will need to think twice before giving consent to a leaseholder for a release or waiver of a tenant’s covenants in a lease following the decision of the Supreme Court in Duval v 11-13 Randolph Crescent Limited.

Duval owned a flat in a building which contained nine flats all let on long leases in return for substantial premiums. All the leases were in substantially the same form.

One leaseholder in the building, W, wished to carry out substantial works to their basement flat which were otherwise absolutely prohibited by the lease. W applied to the landlord for consent to carry out the works and the landlord agreed. Consent was going to be given even though the works – involving the removal of a substantial part of a load-bearing wall – were absolutely prohibited by the lease.

Duval and residents of other flats objected to the works. They asked for an undertaking from the landlord that it would not grant any consent to these works and, in addition, would take enforcement action against W preventing them from carrying out the works. The landlord refused, so Duval commenced proceedings against the landlord.

W’s lease contained a covenant by W not to carry out any works which might maim or injure any roof, wall or ceiling within or enclosing the flat. There is a similar covenant by leaseholders in clause 3.8.1 of the model form shared ownership lease of a flat in which the leaseholder covenants:

3.8.1    Not to:

(a)        make any alterations or additions to the exterior of the Premises

(b)        make any structural alterations or structural additions to the interior of the Premises

(c)        erect any new buildings on the Premises

(d)        in any way interfere with the outside of the Building.

There was no doubt in this case that the landlord could withhold consent to the works for any reason.

The lease also contained a covenant by the landlord to ensure that every residential lease in the building contained covenants and regulations in similar terms.

Again, there is a similar covenant in the model form shared ownership lease which provides as follows:

5.6       Lettings of other flats

That every lease or tenancy of any flat in the Building granted after the date of this Lease by the Landlord shall contain covenants to be observed by the tenant of that flat similar to those set out in ‎Schedule 2 (Mutual Covenants) and (save in the case of any flat which may be let at a rent on a periodic basis or for a fixed term of seven years or less) shall be substantially in the same form as this Lease.

In addition to this, the landlord covenanted in the Duval lease, at the request and cost of Duval, to enforce any covenants entered into with other residential tenants of the building.

The equivalent clause in the model form shared ownership lease is as follows:

5.7       Enforce covenants in other leases

If so required by the Leaseholder to enforce the tenant’s covenants similar to those contained in this Lease which are or may be entered into by the tenants of other flats in the Building so far as they affect the Premises provided that the Leaseholder indemnifies the Landlord against all costs and expenses of such enforcement.

Accordingly, Duval argued that, because the landlord had not only agreed to grant leases in substantially the same terms (which contained an absolute prohibition on these works) but also to enforce such covenants upon request, the landlord could not waive a breach or consent to W’s works, which would otherwise be in breach of the tenant’s covenants.

The Supreme Court agreed. It held that the landlord enforcement clause  - similar to clause 5.7 above -  would be deprived of any practical effect if the landlord was able to consent to works, which would otherwise be in breach of the lease.

As a consequence of this case, when housing associations receive any request for consent from a leaseholder under a lease they should:

  • check what the lease says on the issue
  • ascertain whether the housing association is under a duty not to unreasonably withhold or delay such consent
  • be aware they do not have an unfettered discretion to release or modify tenant’s covenants and
  • consider whether they need to obtain the consent of all the leaseholders in the building at the cost of the tenant who has made the application

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