A landlord promised each flat owner that, if asked and put in funds, it would enforce the covenants in the other flats’ leases. The Supreme Court held that the landlord of 11-13 Randolph Crescent could not keep that promise and at the same time license one owner to remove part of a load-bearing wall in breach of an absolute covenant against cutting walls. Granting that licence would itself break the leases of the other owners, including Dr Julia Duval, and the landlord’s appeal was dismissed.
The flats and the covenants
The building contained nine flats with long leases. The freeholder was a management company owned by the leaseholders. Each leaseholder had the benefit of similar promises about what the other flat owners could do.
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Each lease includes the interior of the flat but not, among other things, the outer and load-bearing walls. Clause 2.6 forbids alterations or improvements without the landlord’s previous written consent. Under section 19(2) of the Landlord and Tenant Act 1927, that consent is not to be unreasonably withheld. Clause 2.7, headed “waste”, is an absolute covenant. The lessee must not commit waste, spoil or destruction, and must not cut, maim or injure any roof, wall or ceiling within or enclosing the flat, or the sewers, drains, pipes and other service media mentioned in the clause. As between landlord and lessee, the landlord can still license what would otherwise break clause 2.7. The issue was whether doing so would break a separate promise to the other lessees.
That promise is clause 3.19. The landlord agrees that every later lease of a residential unit granted at a premium will contain covenants of a similar nature to those in clauses 2 and 3. It also agrees that, if a lessee asks and first provides security for the landlord’s costs on a complete indemnity basis, the landlord will enforce similar covenants entered into by a tenant of any other residential unit.
The proposed works
One flat owner sought a licence for works that included cutting a substantial part of a load-bearing wall at basement level. It was agreed that this work came within clause 2.7.
In December 2015 and again in February 2016, Dr Duval asked the landlord to obtain an undertaking that Mrs Winfield would not cut or maim any load-bearing or structural wall in flat 13RC, and said that the landlord would be indemnified if legal action became necessary. On 12 May 2016 she claimed a declaration that the landlord had no power to permit Mrs Winfield to act in breach of clause 2.7.
The courts below
Deputy District Judge Chambers held that the landlord could not waive any covenant in clause 2 without the prior consent of all the lessees. Judge Parfitt, in the Central London County Court, allowed the landlord’s appeal on 27 July 2017. He held that the landlord could license works which would otherwise breach clause 2.7; that licensed works would not be a breach; and that they could not then be enforced under clause 3.19.
The Court of Appeal allowed Dr Duval’s appeal. Lewison LJ, with whom Newey LJ and Sir Stephen Richards agreed, treated clause 3.19 as two promises: future premium leases would contain similar covenants, and the landlord would enforce them if a lessee requested enforcement and provided security. The second promise was contingent. The court assumed that the contingency had not arisen, and the Supreme Court proceeded on the same assumption. Even so, Lewison LJ held that licensing something which would otherwise breach an absolute covenant in clause 2.7 would breach clause 3.19 in each other flat’s lease, whether or not another lessee had already made the request. The Court of Appeal declared that such a waiver or licence would be a breach of clause 3.19 in the other leases.
Routine alterations and destructive work
Lord Kitchin, with whom Lady Hale, Lord Carnwath, Lady Black and Lord Sales agreed, rejected the parties’ shared view that clause 2.7 simply sets the boundary of clause 2.6. These were long leases acquired for a substantial premium. Over their lifetime, flats would need repairs, replacement of services, modernisation and improvements. Routine work of that kind was unlikely to affect other lessees or the structure, and the landlord needed to be able to permit it where appropriate.
Clause 2.6 therefore covers routine alterations and improvements, which a lessee would expect to carry out with the landlord’s approval. Clause 2.7 is directed at waste, spoil or destruction: activity beyond routine alteration which may damage or destroy the building. Cutting which is not itself destructive, and is only incidental to normal work under clause 2.6, does not fall within clause 2.7. Lord Kitchin found support for reading the absolute covenant so that it does not conflict with the qualified covenant in F W Woolworth and Co Ltd v Lambert.
Other obligations already restrict the landlord. Each lessee has quiet enjoyment. The landlord must not derogate from its grant: permitting a neighbour to cut a load-bearing wall so as to remove or substantially interfere with the support given to Dr Duval’s flats would do so. A landlord who authorises a nuisance may be liable for it. The landlord has also covenanted to repair the structure and common parts.
Why a licence would break clause 3.19
Clause 3.19 does not expressly forbid a licence for work within clause 2.7. Dr Duval’s main argument was that, properly construed, it precludes such a licence unless the other lessees agree. Her alternative was an implied term that the landlord will not disable itself from complying with a request under clause 3.19.
Lord Kitchin treated the limit as an implied term, not a rigid rule of law. The express terms are construed first. A term is implied only if it is necessary to give the contract business efficacy, or so obvious that it goes without saying, and if it can be clearly expressed. The term here is that the landlord will not put it out of its power to enforce clause 2.7 by licensing what would otherwise be a breach.
That term is required because clauses 2 and 3.19 protect all the lessees. Each knows that the others are and will remain bound by similar qualified and absolute covenants, and that the landlord must keep those covenants in place. If another lessee threatens or commits a breach, the landlord must, on request and security, take enforcement action. The complaining lessee is entitled to have clause 2.7 enforced as an absolute covenant. The promise would lack practical content if the landlord could modify it or authorise a breach.
The landlord no longer argued that it could authorise a breach at any time. It said it could do so until another lessee requested enforcement and provided security, because it could not be obliged to sue a lessee with a complete defence. Lord Kitchin accepted that a waiver may stop the landlord suing the licensed lessee. That does not mean the landlord has performed clause 3.19 for the objecting lessee. The parties cannot have intended a valuable right to depend on which of them acted first.
The landlord’s concern about an unworkable veto was based on too wide a reading of clause 2.7. Routine repairs and improvements fall under clause 2.6 and may be permitted. Clause 2.7 covers more fundamental work which may damage the building. Mrs Winfield’s proposal involved cutting into and removing a substantial portion of a load-bearing basement wall excluded from her demise. The parties rightly agreed that this fell within clause 2.7, and Lord Kitchin considered it appropriate that work of that kind should require the consent of the other lessees, including Dr Duval.
Verdict: The Supreme Court unanimously dismissed the landlord’s appeal. Licensing the proposed breach of the absolute covenant would breach the landlord’s enforcement promise to the other lessees. This applied even before a lessee had requested enforcement and provided security for costs.
