The Supreme Court’s decision in the case of Duval v 11-13 Randolph Crescent Limited [2020] UKSC 18 on appeal from [2018] EWCA Civ 2298, was handed down yesterday (6 May 2020) and confirms that landlords should ensure, when faced with requests for consents under a lease, that consent is only granted where the landlord is entitled to do so.
Where the lease contains:
- an absolute prohibition against certain conduct (ie, subletting or alterations);
- a commonly found provision that all leases in the development are to be granted on similar terms;
- a commonly found provision that where a lessee is prepared to indemnify the landlord’s costs, the landlord is obliged to enforce the provisions of the leases against a lessee who is in breach;
the landlord may not grant consent for something that would otherwise breach the terms of the lessee’s lease as to do so will amount to a breach by the landlord of its own obligations to all other leaseholders.
Where consent is provided in those circumstances, a landlord should be prepared for legal action by complaining leaseholders to compel the landlord to enforce the prohibitions under the lease, or a claim in damages if it is unable/unwilling to do so.
What are the practical considerations of this decision?
It is not unfair to say that Dr Duval, the upset party in the above matter, is likely to prove to be a rare breed. Why? Well, she was prepared and financially able to provide the landlord with an indemnity for costs to fulfil her request that the landlord take action against the offending leaseholder. She was equally financially able and willing, and importantly sufficiently driven, to then take the landlord to task when it refused to accede to her request of enforcing against the leaseholder.
In our experience, leaseholders willing and able to put their hand in their own pocket to indemnify the landlord’s costs of pursuing a defaulting leaseholder are few and far between.
In addition, the remedy available to leaseholders who find themselves affected by a breach by the landlord is damages. What damages, though, will other leaseholders actually suffer as a result of the granting of consent in the specific context of each case? In most cases that is likely to be little more than minimal and thus, is a repeat of the action by Dr Duval realistically to be expected in every case? Unlikely, but still possible.
On that basis then, and following a proper and full assessment of the risks, there is an argument to say that consent requested, even in circumstances similar to those in the leases applicable in Duval v 11-13 Randolph Crescent, might still be granted but only so long as the landlord understands that it is unlawful to do so and the risks involved were it to proceed.
Ideally no landlord, or its agent, should grant consent for alterations, or anything else in the lease where consent is required, without first obtaining advice on the specific lease terms in the context of the request made - particularly in light of this Duval result. Obtaining specific advice will, at the very least, ensure that if the consent should not be granted because of the lease provisions but the landlord is minded to grant it anyway, then at least it does so fully informed of the risks.
As an aside, it is worth highlighting, on the subject of risk, that whilst the writer does not know what damages are sought by the now victorious Dr Duval against her landlord, nor what costs her landlord incurred as a result of the lengthy and no doubt extremely expensive litigation, nor what proportion of Dr Duval’s costs her landlord is going to be ordered to pay, it is fair to say that, from the landlord’s perspective, it is unlikely to have been worth granting the consent given what followed it.
Should you have any questions in relation to the above, then please do not hesitate to contact Kevin Lever, Principal, KDL Law.
