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A recent case in the Court of Appeal considered whether a landlord allowing a tenant to carry out works which would breach the terms of her lease would in itself be a breach of the landlord’s covenant given in the leases of other flats in the same building to enforce covenants if requested to do so by another tenant. The Court found that it could.
The landlord was a company owned by all the tenants collectively, which was willing to grant consent to an application from one of the tenants to carry out works which were not permitted by her lease. The lease also contained a covenant by the landlord that all residential leases of the building would contain similar covenants, and if requested (and funded) by another tenant the landlord would enforce those covenants.
The tenant who took issue with the application for works (the appellant) argued that if the landlord granted consent to the works and therefore allowed a breach of the lease to take place, it would not be able to comply with its own covenant to enforce the terms of the tenant's lease if requested to do so. It therefore argued that it was implicit that the landlord would not agree to something that prevented it from complying with its own covenant at a later date.
The landlord argued that it had the right to do as it pleased with its own property and would usually be free to consent to a request which would otherwise be a breach of a tenant's covenant, and that should not put it in breach of its own covenants. The lease did not say that the landlord was prohibited from consenting to something that would otherwise be a breach of the lease, and if the tenant was permitted to breach a covenant in advance of carrying out the works in question then no breach of covenant would actually take place – so there would be nothing for the landlord to enforce.
The judges agreed that the tenants were entitled to require the landlord to enforce the covenants contained in the lease in the event of a breach. It therefore made sense that the landlord should not be able to grant consent to something that would otherwise be a breach of covenant and in so doing, prevent itself from being able to adhere to other covenants given to other tenants. They acknowledged that if interpreted literally, the lease would prevent tenants from carrying out a range of normal activities such as installing recessed lights in a ceiling or rewiring a flat, but found that this was a fault of the way the lease was drafted and the fact that it contained an absolute prohibition on carrying out alterations to the roof, wall or ceiling within enclosing the demised premises. They suggested that if this covenant had been qualified and allowed the tenant to carry out such works with landlord's consent then the landlord would not be breaching the lease by granting such consent.
The judges therefore found in favour of appellant and held that the landlord would be in breach of its covenant to the other tenants if it waived compliance with the tenant’s covenants.
This case highlights the need for good drafting to minimise the risk of litigation further down the line. Our property teams negotiate leases on a daily basis. If you are granting or taking a lease, please contact us on 0161 941 4000 and ask to speak to one of our Commercial Property team who would be happy to assist. Alternatively please email us on firstname.lastname@example.org.
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