This is an interesting question and one which I know many leaseholders wrestle with when dealing with their landlords. While I’m sure that there may well be leases out there allowing direct enforcement of covenants by leaseholders against other leaseholders I have yet to see one. This leaves leaseholders in a difficult position having to put up with the activities of the offending leaseholder while dealing with the latter is effectively left wholly in the hands of the freeholder/landlord.
In Dr Duval – v- 11-13 Randolph Crescent Limited  EWCA Civ 2298, the Court of Appeal has considered the effect of a landlord waiving a lease covenant which it was obliged to enforce under Dr Duval’s (the aggrieved tenant) lease.
The case concerned a house which had been converted into nine flats and let to tenants under identical long leases. The freeholder was a management company of which all the leaseholders were shareholders.
Each lease contained:
- A conditional clause:
“Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises.” (Clause 2.6)
- an absolute prohibition clause:
“Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein …” (Clause2.7)
- a covenant by the landlord that all leases would contain identical covenants and an obligation on the landlord to enforce a breach of covenant by one tenant at the request of any other tenant (subject to payment or provision of security of the Landlord’s costs) (‘the enforcement clause’):
“That every lease of a residential unit in the Building hereafter granted by the Landlord at a premium shall contain … covenants of a similar nature to those contained in Clauses 2 and 3 of this Lease AND at the request of the Tenant and subject to payment by the Tenant of (and provision beforehand of security for) the costs of the Landlord on a complete indemnity basis to enforce any covenants entered into with the Landlord by a tenant of any residential unit in the Building of a similar nature to those contained in clause 2 of this Lease.” (Clause 3.19)
One of the tenants wished to carry out alterations, including works which would have been carried out in breach of the absolute prohibition clause. The landlord gave consent to the said tenant to carry out the prohibited works. However, prior to the tenant commencing the works another tenant, Dr Duval, requested that the landlord prevent the tenant from carrying out those prohibited works.
Dr Duval argued that the landlord had covenanted to enforce the covenant if the tenant of another flat requested them to do so. She argued further that by agreeing to the works which were of a prohibited nature the landlord had effectively rendered the clause unenforceable as against the tenant carrying out the works. The landlord was as such in breach of the enforcement clause.
The landlord argued that it was entitled to consent to what would otherwise be a breach by the tenant. The tenant was therefore not in breach of its absolute prohibition covenant and as such there was no breach to enforce and likewise no breach by the landlord for failing to enforce it.
The court was asked to determine whether the landlord was in breach of its covenant to Dr Duval to enforce the breach by the tenant carrying out the prohibited works.
The Court agreed with Dr Duval. They held that there were identical clauses in all the long leases i.e. both the absolute prohibition and enforcement clause. The Court held further that the effect of this is that:
“From the perspective of a lessee who is paying a premium for the grant of a long lease, the combination of these two promises would be taken to mean that the lessee could be sure that upon request (and the provision of security) the landlord would enforce the covenants by which each lessee had agreed to be bound. Those covenants would be in the form in which they appear in the leases as granted; and would have the practical effect that their appearance in that form was designed to have.”
The actual enforcement of the covenant might be contingent on payment (or provision of security) of the landlord’s costs on the indemnity basis by the complaining leaseholder, but that did not restrict its application, in the sense that it did not only become operational when the indemnity for costs was made. Put another way, the enforceability of the clause was not reliant on the leaseholder having made a request for enforcement and providing the costs indemnity even though the actual enforcement would be.
By granting consent to the tenant’s works, the landlord had failed to consider that all the leases imposed the same covenants on tenants and further that their decision had made it impossible to enforce the covenants in the same manner against all tenants. The landlord was therefore in breach of its obligations to Dr Duval.
On the issue of waiver, the Court held that: –
“I would grant a declaration to the effect that the waiver by the landlord of a breach of covenant by a lessee or the grant of a licence to commit what would otherwise be a breach of covenant would amount to a breach of (the ‘enforceability’) of the lease.”
The Appeal was allowed in part and the issue of remedy has been remitted to the County Court to decide. Exactly what the remedy available will be in not entirely certain and would depend upon the relevant circumstances of the case.
Some possible guidance from the Court as to remedy:-
“the landlord has power to license what would otherwise be a breach of covenant; but commits a breach of clause 3.19 in doing so. The landlord has no obligation to inform the body of lessees in advance of what it proposes to do. If a lessee wishes to enforce clause 3.19 against the landlord she has a right of action. If the landlord has already granted the licence and it has been acted upon then the landlord will be unable to enforce the covenant (whether by injunction, forfeiture or damages) as regards what has been licensed. In that event the lessee’s only remedy against the landlord under clause 3.19 will be in damages for breach of that covenant”
“Where the licence has not been granted, or if granted has not been acted upon, it is possible that the court might grant an injunction either preventing the grant, or requiring the licence to be undone. But before deciding whether to grant that remedy the court would have to consider what the lessee’s objections were to the grant of the licence. If they were bad reasons, or no reasons at all, that would be a powerful factor militating against the grant of an injunction.”
What the County Court will decide is the appropriate remedy we will have to wait and see but, this case serves as a reminder to all landlords that they should consider whether granting any consent would be a breach of any obligations to any other ‘non-offending’ leaseholders. Failure to do so could result in in breach of obligations owed to them and a claim by the aggrieved leaseholders.
Of course, each case will turn on its own facts and will be dependent on the wording of the covenants contained in the relevant lease, parties are as such encouraged to seek independent legal advice at an early stage.
If you’re a landlord or tenant and would like to discuss your rights under your lease, please contact Darryn Harris or Daniel Crate in our Dispute Resolution team on 01483 302 000 or email firstname.lastname@example.org to discuss how we can help.