UK Supreme Court Offers Lessons For Landlords Of Multi-tenanted Buildings In Cayman

• Published date: 10 August 2020
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Landlord & Tenant - Leases
• Law Firm: Ogier
• Author: Ms Sophie Warburton

Introduction

In the UK, it is common for mutual-enforceability covenants (the nature of such covenants is explained below) to be found in the leases of flats located in apartment blocks. The enforcement of such a covenant was considered by the UK Supreme Court in Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18. While such mutual-enforceability covenants are (to the best of the author's knowledge) not used in the Cayman Islands, the decision offers important lessons about leasehold obligations, especially where the same landlord enters into leases with multiple tenants in the same building. The lessons relate to the nature of the landlord's obligations.

What did the Supreme Court decide?

The case concerned leases of flats in a London building. The building had been converted from two mid-terrace houses into nine flats. The freehold of the building was owned by a company of which the tenants were the shareholders. Each lease, which was for a term of 125 years commencing on 24 June 1981, included a clause 3.19 pursuant to which the landlord covenanted with the tenant that all other flat leases would contain covenants of a similar nature to those the tenant was giving and that at the request of the tenant and subject to provision of security for costs, the landlord would enforce the covenants given by the other tenants.

One of the tenants, Mrs Winfield, wished to carry out works to her flat which would involve removing part of a load-bearing wall This was prohibited by clause 2.7 of her lease, which contained an absolute covenant against "cutting or maiming...any roof wall or ceiling within or enclosing the demised premises". She applied to the landlord for a licence which the landlord was minded to grant, for permission to carry out the work. However, another tenant, Dr Duval, contended that to do so would be a breach by the landlord of the obligations it owed Dr Duval.

The question was whether the grant by the landlord to Mrs Winfield of a licence to carry out an activity falling within clause 2.7 amounted to a breach of clause 3.19 of its agreements with all of the other tenants.

Even though clause 3.19 did not say expressly that the landlord could not give a tenant permission to carry out structural work falling within the scope of clause 2.7, the Supreme Court held unanimously that it was implicit in Dr Duval's lease that the landlord would not put it out of its power to enforce clause 2.7 of Mrs Winfield's lease by licensing the activity that...