The implications of a recent court ruling means that landlords may have left themselves exposed to legal action if they gave permission to leaseholders to carry out certain property works in the last 12 years.
The case of Duval v 11-13 Randolph Crescent Ltd has the potential to be relevant to many of the 4.3 million leasehold properties in the UK, so has been watched with interest by litigation lawyers as it worked its way through the court system.
The claim concerned something most would think relatively innocuous – the ability of a landlord (i.e. the freeholder of a property) to permit a leaseholder to carry out work to their property. Many leases will have clauses that restrict the ability of leaseholders when it comes to works, for obvious reasons - nobody wants their neighbour to be freely knocking out walls that could be structurally vital, for example.
In fact, the Duval case concerned just such a situation. One of the leaseholders, a Mrs Winfield, planned various works to her basement flat, including the removal of a substantial section of load bearing wall. The lease stated that leaseholders could not “cut, maim or injure any roof, wall or ceiling”; notably this restriction was absolute, i.e. there was no mechanism for the landlord to agree to such works even if they wanted to.
In addition, the lease also contained a further covenant in which the landlord agreed to enforce the terms of the lease against a leaseholder in breach where required to by another leaseholder (a “mutual enforceability clause”, which is common in flats, apartment blocks and other leasehold properties).
Mrs Winfield accepted that the works she proposed to undertake would put her in breach of the lease if she went ahead without permission. Accordingly, she asked for consent from the landlord, which after some back and forth, was granted.
At this point, however, another leaseholder in the property, Dr Duval, protested and pursued legal action. Dr Duval’s position was that if another leaseholder breached the terms of the lease, ordinarily she could use the mutual enforceability clause to force the landlord to remedy that breach. However, as the landlord had granted permission for that breach, they could now not uphold their end of the mutual enforceability clause in the future, if required to by Dr Duval. This, in practical terms, had put the landlord in breach of the lease.
Ultimately, the Court agreed with Dr Duval and agreed that in circumstances where i) a lease does not permit a landlord to consent to works, and ii) there is a mutual enforceability clause, a leaseholder cannot get permission from the landlord to do works that would breach the lease.
How then, can a leaseholder carry out such works? Short of getting agreement from every leaseholder, the answer would appear to be that they cannot. Nor does this apply just to substantial works – it could apply to much more mundane covenants in a lease such as restrictions on pets, flooring, and noise.
Perhaps more worrying for freeholders is that it means that we now know that landlords in this situation who have previously granted consents have breached their leases (albeit inadvertently) and potentially exposed themselves to action by their leaseholders. Given these actions have a limitation period of 12 years, that raises the possibility of many thousands of potential claims.
The other side of the coin, of course, is that this has the potential to impact leaseholders and their ability to do work to their own property.
What can concerned landlords do to try and head off such claims? Firstly, obviously much will turn on the actual wording of the leases, so starting with a review of these would be essential. In the event these do reveal a potential problem, there are steps the landlord can take.
Varying the terms of the lease so as to allow for consent to works may be feasible; indeed, this could be an attractive option to the leaseholders, once they become aware that they will not be able to get consent for any works they wish to carry out. Seeking consent for works from all leaseholders may be feasible, at least in smaller buildings.
If you are a concerned freeholder or leaseholder, then Stone King can advise you on your rights and liabilities