The consequences of breaching absolute covenants
13th May 2020
By Nicola Muir
Residential leases can last a long time. A lot can change in 99 years or 999 years. What the landlord deemed an absolute “no-no” in 1965 might not seem such a bad idea now. However, following the Supreme Court’s decision in Duval v 11-13 Randolph Crescent Ltd  UKSC 18;  PLSCS 84 if the landlord has given other leaseholders in the block the benefit of a mutual enforceability covenant, the landlord will put itself in breach of covenant if it gives a tenant permission to do something which would breach an absolute covenant. The consequences of this decision are potentially far reaching.
Duval v 11-13 Randolph Crescent Ltd
11-13 Randolph Crescent is a block containing nine flats, each subject to a 125-year lease commencing in 1981. Martha Winfield, the lessee of Flat 13RC, wished to remove a substantial part of a load-bearing wall in the basement of her flat.
She accepted this would be in breach of clause 2.7 of her lease so she approached her landlord for a licence. Having studied the engineering and architectural reports provided by Winfield, the landlord was minded to grant that licence.
However, before it did so, the tenant of the flat above – Dr Julia Duval – issued proceedings for a declaration that the landlord did not possess the power to grant the licence because, provided the tenant agreed to indemnify the landlord for the cost, the landlord promised to enforce the covenants in the lease at the tenant’s request. Such provisions are common and are known as mutual enforceability covenants.
The Supreme Court framed the question before it as whether the landlord of a block of flats is entitled, without breach of covenant, to grant a licence to a lessee to carry out work which, but for the licence, would breach a covenant in the lease of his or her flat, where the leases of the other flats require the landlord to enforce such covenants at the request and cost of any one of the other lessees. The lease in question contained two covenants in respect of alterations.
- Clause 2.6: “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” – the qualified covenant; and
- Clause 2.7: “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…” – the absolute covenant. Duval’s case was that, as the landlord had undertaken via the mutual enforceability covenant to enforce the covenants of the lease, it could not do the opposite, namely, licence the breach of an absolute covenant. Such a licence would render the mutual enforceability covenant ineffective. She claimed there was an implied term that the landlord would not put it out of its power to enforce clause 2.7 of the lease by licencing what would otherwise be a breach of it. The Supreme Court, like the Court of Appeal before it, agreed.
It was pointed out to the court that tying the landlord’s hands in this way would give rise to practical difficulties. Over the lifetime of the leases, it was inevitable that lessees may occasionally wish to carry out repairs or improvements which did not impinge in any way on neighbouring flats or on the landlord’s retained interest but fell within the scope of clause 2.7. For example, a routine rewiring of a room would involve “cutting” a wire and a wall in breach of the absolute covenant. Lord Kitchin (who gave the sole judgment with which the other judges agreed) said this argument was based on the misapprehension that clause 2.6 and clause 2.7 were mutually exclusive. He found that as a matter of construction, the two clauses had to be read together and that the absolute covenant had to be read so that it would not kick in with regard to anything falling within the qualified covenant.
Lord Kitchin’s construction of clauses 2.6 and 2.7 in the context of the Duval lease neatly sidestepped the practical difficulties which might otherwise have arisen in relation to consent for modest alterations at 11-13 Randolph Crescent. However, similarly worded mutual enforceability covenants are more or less standard in modern leases and usually cover all the lessee’s covenants.
Many of these covenants will be absolute and it is not difficult to anticipate more unreasonable challenges to permissions based on the principles established by Duval. For example, during the current pandemic it might not be unreasonable for a landlord to give permission for a tenant to work from home in breach of an absolute covenant not to use any part of the demised premises for business purposes.
I recently came across a covenant requiring the tenant to have lace curtains over the windows at all times – the landlord would technically be prohibited from waiving this covenant, albeit it seems unlikely anyone would be bothered. More commonly, many leases contain an absolute covenant against wooden flooring but it may be that improvements in soundproofing have rendered a landlord’s refusal to waive such a covenant overly draconian. Landlords may now be reluctant to approach requests for consent objectively and feel that they are obliged to refuse unless the covenant is qualified.
Duval gives leaseholders reassurance that the landlord will not be able to move the goalposts by allowing activities in the block which they had assumed were prohibited when they bought their lease. However, leases last a long time and it is not always possible to predict how technology, fashion and construction will change. What seems totally unacceptable in a residential block now may be viewed very differently in 50 years’ time.
This article was published in the Estates Gazette on 11th May 2020.