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Landlord's obligation to enforce

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Landlord's obligation to enforce

Absolute Covenants

Breach of Covenants – Landlord’s duties

Duval v 11-13 Randolph Crescent Ltd
[2018] EWCA Civ 2298

Summary

Where several leases covering a block of flats contained an absolute covenant requiring the lessees not to carry out certain actions, and a separate covenant requiring the landlord to enforce the absolute covenant at the request of any other lessee, the landlord would be in breach of the latter if they granted to a lessee a licence to carry out the prohibited action.

Facts

One of the lessees wanted to carry out works to her flat, including the removal of a portion of wall. The leases contained an absolute covenant at clause 2.7 requiring each lessee not to cut any of the walls or ceilings.

There was a further covenant on behalf of the landlord at clause 3.19 that they would enforce any covenants entered into between them and a lessee at the request of any other lessees upon the provision of security. However, the landlord was willing to grant a licence to the lessee to carry out the works to avoid a breach of clause 2.7.

Issue

The court was required to construe these two clauses, and whether the granting of a licence would be a breach of clause 3.19. The Claimant sought a declaration that it was.

First instance

The Claimant was successful at first instance, however that decision was reversed on appeal to a circuit judge.

Decision on appeal

The Court of Appeal allowed the appeal and a Declaration was granted confirming that the Landlord was in breach of its covenant.

The landlord had made two express promises in clause 3.19 – the first was that all leases would contain similar legally binding obligations on each lessee, and the second was that the landlord would enforce those covenants at the lessee’s request and expense. The combination of those two promises meant that the lessee could be sure that, upon request and provision of security, the landlord would enforce the covenants by which each lessee had agreed to be bound.

The power of enforcement had vested in the landlord. However, each lessee had been given the right to compel the landlord to enforce the covenants in the lease regardless of whether he wanted to or not.

Clause 3.19 did not expressly say that a breach would be committed if a landlord was to grant a licence permitting actions that would otherwise be a breach of the absolute covenant. The issue was therefore whether it was necessarily implied in the way the obligation had been drafted.

There was a long line of authority in which the courts had consistently held that where an obligor undertook a contingent or conditional obligation, they were under an obligation not to prevent the contingency from occurring or from putting it out of their power to comply with the obligation if and when the contingency arose – for example Berkeley Community Villages Ltd v Pullen [2007] EWHC 1330 (Ch).

If a lessee was entitled to require the landlord to enforce clause 2.7 in the face of a threatened breach, it seemed to follow that the landlord could not put it out of his power to do so by licensing what would otherwise be a breach of covenant. It would not give practical or commercial coherence to the lease if the landlord had carte blanche to vary or modify the covenants, or to authorise what would otherwise be a breach of them. Whilst that interpretation might cause inconvenience to lessees, the vice lay in the fact that clause 2.7 had been drafted as an absolute covenant.

It did not matter that the court had proceeded on the assumption that the appellant had not provided the security because the previous authorities held that there was a breach of contract where an obligee had disabled themselves from performance if and when the contingency arose.



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