Commercial Landlord And Tenant Round-up 2020: Key Decisions Despite Covid Chaos

Published date03 December 2020
Subject MatterReal Estate and Construction, Landlord & Tenant - Leases
Law FirmWalker Morris
AuthorMr Martin McKeague, David Manda and Lewis Couth

This article was written for, and published in, the Property Law Journal which can be read here.

Much of the practice of the specialist property litigator will have been dominated, during 2020, with getting to grips with the Coronavirus Act 2020 and the Corporate Insolvency and Governance Act 2020; with keeping on top of changing guidance and timescales in respect of forbearance measures; and with overcoming the practical challenges arising from the pandemic, such as the witnessing and execution of documents, effecting service, conducting virtual court hearings, and the like. Add to all that the facts that, during times of economic uncertainty, many businesses struggle to meet financial and repairing lease liabilities and/or seek to divest themselves of surplus properties, and seems likely that many commercial landlords, tenants, agents and advisors will have had a very busy, and potentially a very stressful, year.

Despite such difficulties, 2020 has seen a number of important decisions. Walker Morris' dedicated real estate litigators Martin McKeague, David Manda and Lewis Couth highlight some of the key cases to note.

Duval v Randolph Crescent: Supreme Court clarity on the enforcement of leasehold covenants

During the UK's first national lockdown the Supreme Court published its decision in Duval v 11 - 13 Randolph Crescent Ltd [2020] UKSC 18 - a case of particular importance for landlords of multi-let buildings.

Covenants containing absolute prohibitions against carrying out certain acts or works are common in leases of residential multi-let buildings and appear, albeit more rarely, in some commercial developments. The same prohibitions are generally mirrored in all leases within the development and they are effective because of a landlord's obligation to enforce against anyone in breach at the request of other tenants. Such covenants can be essential for good estate management and can preserve property and investment values. However, landlords often nevertheless choose to license or waive breaches of such covenants, as that can be commercially advantageous and it can foster good landlord and tenant relationships.

The Duval v Randolph Crescent case concerned the working of such covenants and, in particular, a landlord's ability to consent to or waive breaches so as to deal with its premises as it sees fit. The case involved residential long leases containing: an absolute prohibition against carrying out structural works to walls within or enclosing individual flats; and a landlord's covenant that all leases in the building will contain the same prohibition and will be enforced at the request of any other tenant.

One of the tenants applied for permission to carry out works which would breach the prohibition and the landlord wanted to grant consent. However another tenant, Duval, objected. Duval argued that the landlord was precluded from consenting to the works as that would prevent it from complying with its covenant to enforce.

The County Court agreed with Duval; the High Court agreed with the landlord; and, in 2018, the Court of Appeal allowed Duval's appeal.

Key to the Court of Appeal's decision was the fact that, whilst the practicalities of block management and commercial common sense are relevant, the starting point in a dispute of this type is the wording of the lease itself (Arnold v Britton [2015] UKSC 36). Here, the wording of the landlord's covenant did not expressly preclude a landlord from licensing or waiving a breach of a tenant covenant/prohibition, but there was the question whether that could be implied. The Court of Appeal considered authority on the test for implying terms (M&S v BNP Paribas [2015] UKSC 72) and the line of cases in which the courts have consistently held that where an obligor undertakes a contingent obligation, he must not put it out of his power to comply with the obligation if and when the contingency arises. It concluded that implying a term that a landlord could not license or waive a breach of the relevant prohibition was necessary ("[i]t would not give practical or commercial content to the obligation if the landlord had carte blanche to vary or modify the covenants; or to authorise what would otherwise be a breach of them" para 27). The Court of Appeal therefore held that to permit or waive a breach of the...

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