In making this judgement, the Supreme Court confirmed that the landlord was not free to license any alterations which were in breach of (or to waive compliance with), the absolute covenant contained in the lease agreement, without first gaining agreement from all of the other tenants.
The key clauses in the lease agreement
Clause 2.6 within the lease attached to each flat in 11-13 Randolph Crescent prevented any tenant from undertaking any work on the demised premises (i.e. premises that have been transferred by lease) without the landlord's permission, but by virtue of section 19(2) of the Landlord and Tenant Act 1927, any such consent could not be unreasonably withheld.
Clause 2.7 contained an 'absolute prohibition' clause preventing any tenant from cutting into any 'roofs, walls, ceilings or service media'.
Clause 3.19 also imposed an obligation on the landlord to enforce, at the request and cost of any tenant, covenants in the leases held by the other tenants, including any which are similar to clause 2.7. Specifically, this clause states, "every lease of a residential unit in the Building hereafter granted by the Landlord at a premium shall contain regulations to be observed by the tenant thereof in similar terms to those contained in the Fifth Schedule hereto and also 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".
The tenant's request to complete major work
The work for which W sought consent was not insubstantial. It necessitated the removal of a large part of a load-bearing wall located at basement level. Another tenant, D, had raised their objection to the alterations, however, the landlord proceeded to licence the work with the caveat that W put in place suitable insurance before commencing. The objecting tenant, D decided to undertake legal proceedings against the landlord, specifically to seek clarification that the landlord did not have the right to license another tenant to carry out work which would have been in breach of lease clause 2.7.
The Court of Appeal had previously found in favour of D, however, the landlord had appealed the decision. Lord Kitchin, with the agreement of Lady Hale, Lord Carnwath, Lady Black, and Lord Sales, dismissed this appeal. In reaching this conclusion, he held that clauses 2.6 and 2.7 were for different kinds of activity, with the absolute covenant (section 2.7) being for works which may be intrinsically damaging or destructive to the building work. Furthermore, under clause 3.19, D was entitled to require the landlord to enforce the absolute covenant. It was not for the landlord to unilaterally change clause 2.7 or to authorise what would otherwise be a breach of it. By licensing the tenant to carry out prohibited work, the landlord was effectively prevented from complying with any future enforcement request under clause 3.19 and, hence, deprived the flat tenants of a right of action.
This decision by the Supreme Court reaffirms the original legal position that landlords are not free to ignore an absolute prohibition by giving consent to alterations. This will provide much-needed clarity for property law practitioners, landlords who are considering granting such licenses, and tenants who are either requesting permission to carry out prohibited works or those who are concerned at the granting of such permission by a landlord to another tenant.
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