Duval Case: Beware the Breach of Covenants

The Supreme Court’s decision in the case of Duval v 11-13 Randolph Crescent Ltd [2020] (Duval) is likely to have wide implications for landlords and tenants alike as it concerns the mutual enforceability of tenant covenants which is a standard provision in most modern leases.

Randolph Crescent is a block of 9 flats all subject to a 125-year lease drafted on the same terms. One of the flat owners (Mrs Winfield) wished to make some quite substantial alterations to her basement flat by removing approximately seven metres width of load bearing wall.  Such alterations were prohibited by the lease which contained an absolute covenant not to “cut, maim or injure or suffer to be cut maimed or injured any roof, wall or ceiling within or enclosing the demised premises”.  Mrs Winfield was aware that the alterations she was proposing would be in breach of this covenant and sought a licence for the works from the landlord (in line with the standard alteration provisions in the lease) and provided expert reports to provide some reassurance to the landlord.  On this basis the Landlord was minded to grant a licence to Mrs Winfield for the alterations.

However, Dr Duval who occupied the flat above Mrs Winfield objected. The leases at Randolph Crescent also contained a covenant that the landlord would enforce the lease covenants at the request of another tenant in the building.  Accordingly, Dr Duval argued that since the landlord had undertaken (via the mutual enforceability covenant) to enforce the covenants of the lease, it could not do the opposite i.e. grant a licence for something which was a breach of an absolute covenant, because to do so would render the mutual enforceability covenant ineffective.

The Supreme Court agreed with Dr Duval and as a result of this decision a landlord cannot grant a licence which allows something which would otherwise be a breach of covenant.

Where there is a block of flats it stands to reason that what one tenant might do to their flat could affect the quiet enjoyment or even property value of the adjoining owners.  Accordingly, landlords need to be careful not to licence something that is prohibited under the lease.  Landlord’s may also want to consider the use and precise wording of absolute prohibitions.  If for example the covenant was drafted so that it was qualified, i.e. such works would require consent, then arguably the landlord would not have been in breach of covenant by providing consent and granting a licence to Mrs Winfield.