Warning for Landlords Consenting to Tenants' Prohibited Works
Is a landlord in breach of covenant for waiving a lease covenant which it was obliged to enforce?
In Dr Duval - v- 11-13 Randolph Crescent Limited, the Court of Appeal has considered the effect of a landlord waiving a lease covenant which it was obliged to enforce under a separate agreement.
The Facts
The case concerned a block of nine flats, let to tenants under identical leases. Each lease contained:
- an absolute prohibition on tenants carrying out certain works
- a promise by the landlord that all leases would contain identical covenants
- an obligation on the landlord to enforce a breach of covenant by one tenant at the request of any other tenant.
The landlord gave consent to one tenant (T1) to carry out prohibited works. Before T1 began the works, another tenant (T2) called upon the landlord to prevent T1 from carrying out those works. Unfortunately, the landlord was unable to do this, as by consenting to the works, it had waived its right to enforce against T1.
The Arguments
The court was asked to decide whether the landlord was in breach of its covenant to T2 to enforce the breach by T1.
The landlord argued that it was entitled to consent to what would otherwise be a breach by T1. T1 was therefore not in breach of its covenant in carrying out the works, and so there was no covenant for the landlord to enforce and no breach by the landlord for failing to enforce it.
T2 argued that the landlord was in breach of its obligation to enforce against T1, as by granting consent to the prohibited works, the landlord had made it impossible for it to enforce the covenant against T1.
The Decision
The court found in favour of T2. By granting consent to T1's works, the landlord had failed to ensure that all of the leases imposed the same covenants on tenants and had made it impossible to enforce the covenants in the same manner against all tenants. To find otherwise would defeat the purpose of the landlord's covenants. The landlord was therefore in breach of its obligations to T2.
The case has been remitted to the County Court to decide what remedy T2 should be awarded. It remains to be seen what loss T2 has suffered as a result of the landlord's consent to T1's works, and whether the County Court will think it appropriate to award an injunction or damages to T2.
A Lesson for Landlords
This case is a reminder that landlords should consider all of their obligations before waiving breaches by individual tenants. Landlords who do not do so may find themselves in breach of obligations owed to others.
Of course, all leases needs to be interpreted on a case-by-case basis, and not all leases which contain similar covenants will operate in the same way.