The Supreme Court has handed down judgment in this recent case, which has made significant waves in the world of residential management. The judgment applies to circumstances where a landlord of a residential block has covenanted with the leaseholders to enforce tenant covenants upon request and, sometimes, upon conditions (such as the payment of costs).
In Duval, one leaseholder applied for and was granted licence by the landlord to undertake structural works at her flat. The works would otherwise have been in breach of an absolute covenant in her lease preventing her from carrying out structural alterations. Another leaseholder objected to the works and sued the landlord, arguing that in granting the licence the landlord had itself breached its obligation to enforce tenant covenants.
The Supreme Court held that the landlord was indeed in breach. Significantly, it held that the landlord’s breach occurred as soon as the licence was granted - even though the objecting leaseholder had not provided security for costs as it was required to do as a precondition of the landlord’s obligation to enforce tenant covenants. By granting the licence, the landlord had put it out of its power to enforce that particular covenant should another tenant ask it to do so.
This breached the leases of all other tenants in the block.
This could have wide ranging implications for landlords. Allowing any tenant to do something which is technically a breach of its lease could now place the landlord in breach of lease with its other tenants. This could apply to works covenants; covenants not to keep pets; restrictions on wooden flooring – the list is endless. The decision will also apply retrospectively, meaning that landlords could be at risk in relation to licences granted up to 12 years ago. Although objecting tenants may struggle to prove any real loss, the cost and trouble involved in these claims may prove to become a real issue for landlords.
