Long leases & the Court of Appeal decision in Dr Julia Duval v 11-13 Randolph Crescent Limited

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For those residential landlords of long leases out there, the Court of Appeal decision in the case of Dr Julia Duval v 11-13 Randolph Crescent Limited is considered to be quite a problematic one, at least in practical terms. Our associate solicitor Joy Hancock, a specialist in landlord and tenant matters, takes a look at this case in more detail…

The Facts:

The case involves a property, formerly two houses in Randolph Crescent, Maida Vale, which were converted into and let to nine residential tenants by way of a 125 year lease. From the details reported in the Court of Appeal decision, the leases incorporated some quite commonly encountered tenants covenants relating to alterations. One clause prevented a tenant from erecting “..any structure pipe partition wire or post upon the demised premises” or from making or suffering to be made any alteration or improvement in or addition to the same, without the previous written consent of the landlord. Statutory intervention (pursuant to section 19(2) of the Landlord and Tenant Act 1927) means that such consent cannot be unreasonably withheld. Another clause required a tenant “… not to 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 sewer drains pipes radiators ventilators wires and cables therein…”.  Furthermore, an additional clause contained a usual covenant by the landlord to enforce any tenant covenant against one tenant if requested to do so by another tenant of the building.

The Issue:

One of the tenants requested consent from the landlord to carry out alterations to her flat which were not otherwise permitted and which  included, not only works with a degree of structural work, but also works to part of the building which fell outside of her demise. By consenting to these works, the landlord was potentially going outside of the terms of this tenant’s lease and the lease of every other tenant in the building.  Fundamentally if the landlord consented to these otherwise prohibited works, and then subsequently one of the other tenants required him to enforce the original lease provision, the landlord could not do so as he had in essence waived that obligation by way of consent to the prohibited works.

The Question:

Can a landlord grant licence to one tenant to carry out works which would be a breach of an absolute covenant in the lease where the leases of other flats required the landlord to enforce such covenant upon request by another tenant of the building?

The Decision:

The Court of Appeal decided that in such circumstances, a landlord would be in breach of his obligation to enforce the lease covenants at another tenant’s request.

The Implications:

The legal arguments surrounding this decision are likely to go on for some time and the practical implications of this decision should not be underestimated. Whilst the clauses specific to this case have been analysed and interpreted at length, the result of the decision is that a landlord of similar multi-let buildings will now be extremely cautious about consenting to any tenant’s request to carry out what are otherwise prohibited alterations to their demise for fear of putting themselves in a potential breach situation.

The Practical Difficulties:

The practical difficulties are endless, given the extremely tight interpretation of the lease provisions and by no means are limited to the following:

• Potential inconsistency between lease provisions, for example, a tenant covenant to keep the demise repaired and maintained may conflict with the obligation for statutory compliance where such necessary repairs require building regulation consent and that consent specifies a given method or mode of repair which is not permitted by the lease.  An example would be the need for a replacement boiler which requires building regulation approval, but if by replacing that boiler, a larger hole was required to sufficiently vent the new boiler, this would not be permitted by the lease and therefore not comply with statute.  The tenant’s repair obligation cannot therefore be strictly applied without breaching the statutory compliance provision.  In such circumstances, which clause would prevail?
• An inability for a tenant to comply with it’s lease covenants due to very restrictive alteration provisions.  For example, more intrusive necessary repairs would breach the alteration covenant, therefore preventing those necessary repairs from being carried out
• An inability for tenants to generally modernise their demise in keeping with modern technology such as air conditioning, smart IT systems to regulate lighting and heating systems remotely which would require new service media to be introduced into the demise via drilling of structural elements of the building
• A differential in the way in which different types of tenants view the value of their demise – a multi-let building will no doubt have investment tenants who look at their demise as purely a means of raising additional rental income, while occupying tenants have a more personal relationship with their demise as their family home. How can a landlord deal collectively with those differing tenants’ perceptions when trying to manage permitted alterations and modernisation of a multi-let building, without the threat of being in breach of it’s obligations?
• It is arguable that very tightly drafted alterations clauses will prohibit replacement of certain items which in term cause a breach of a different tenant covenant within the lease
• An ability for the landlord to manage expectations of different tenants in general management of the building

The Outcome:

I suspect that one likely outcome of the decision is that if such lease terms are to be interpreted so tightly, that ultimately those tenants will be severely impacted as a consequence. There is a general need over time for buildings to be modernised so as to provide what the market requires. Particularly in the likes of residential long leaseholds in London, there are many old Victorian properties which have over time been converted to flats. It is important and vital for the purpose of safeguarding those properties that there is an ability to move with the times as potential tenants, who are expected to pay highly inflated premiums for property, will expect a high standard of accommodation which meets the needs of their modern lifestyle such as being able to regulate your lighting or heating via your phone while at work or installation of air conditioning.  The interpretation of these specific lease clauses if interpreted tightly will not permit a change to a leaking pipe or radiator and surely, amongst all the legal arguments surrounding this case, there has to be an argument for good sense and practical wellbeing to be considered.

For those tenants seeking to maintain this very tightly interpreted alteration clause and landlord’s enforcement of covenants clause, I would ask you what happens when the value of your demise is significantly reduced because your lease does not allow you even the basic ability for modernisation required in order to preserve the value of your investment? What happens when the flat further down the road sells quicker than yours and realises a higher price because that lease has a more flexible permitted alterations clause?

Without some sensible solution to this issue, the marketability and even mortgagability of flats with these very restrictive clauses has to be questioned and assessed.

A Possible Solution:

A possible solution and one which I am sure will start to evolve, is a rush for many of the long residential leases which contain the same or similar very restrictive clauses to be amended by way of a deed of variation. While all tenants and the landlord of a building would have to be in agreement for this to work,  there is a mutual benefit to be had by all. The landlord can be rest assured that provided he consents to “permitted alterations” such as general repair, updating and modernisation, without impacting on the structural integrity of the building, that he is not in breach of his obligations.  Equally each and every tenant will have peace of mind knowing that they will be permitted to carry out such general repairs as updating and modernisation so as to preserve the value of their demise, but that the marketability and attractiveness of it to potential buyers is not adversely affected.

Are you a landlord looking for advice and legal support with your property portfolio? Contact associate solicitor Joy Hancock today by calling 01889 598888 or email joy.hancock@bowcockpursaill.co.uk