A case relating to the definition of a user covenant in a lease came before the Court of Appeal recently resulting in a decision in April of this year and is of note.  The issue related to how the use of the phrase “live/work” in planning consent for a development and later in the lease of a unit on that development should be interpreted.

The case, AHGR Ltd v Kane-Laverack and another (2023), related to a unit at Bickles Yard in Bermondsey, a mixed use development of 28 units of which 13 were purely commercial, 14 were purely residential and 1 was designated as a “live/work”.

The case related to the single “live/work” unit which was sold on a 999 year lease in 2002 and bought and used initially by a company.  The leaseholders in the present case purchased the flat in 2009 and used it exclusively as a residential unit thereafter until around 2014 when both (one a barrister and one a doctor) lived in and worked from the premises as writers and legal and medical practitioners.  In 2019 the landlord brought a claim against the leaseholders for breach of the user covenant claiming that the typs of work undertaken by the leaseholders was not “work” as envisaged by the planning consent and thus that the unit was not being used as a work/live unit at all.

The relevant fact 

The planning consent for the unit had stated that it must be a “live/work” unit.  The planning application was subject to two plan drawings of the premises submitted at different times. The first showed a separate, clearly demarcated, working space in the premises. That plan was superseded by a later drawing which showed the whole premises as shaded, and the shading was shown in the key as “live/work” space and so no separation between live and work parts.

The lease contained covenants by the leaseholders that prohibited use of the unit other than as a live/work unit in accordance with the terms of the planning permission.  An additional covenant required the leaseholder not to contravene the planning permission.

The landlord brought a claim that the “work” undertaken by the leaseholders was not “work” in keeping with the intention of the planning consent and that that the leaseholders use of the premises, as a residential premises exclusively, breached the planning and thus and also the lease.  As it turned out the issue of whether the type of work undertaken by the leaseholder was not decided upon by the Court of Appeal - it being unnecessary given the nature of the ruling on the interpretation of the user covenant.   

As part of its claim and a significant part of the appeal to the Court of Appeal the Landlord directed the Court to a Supplementary Planning Guidance (“the SPG”) issued by the London Borough of Southwark (“Southwark”). The landlord contended that the words “live/work” in the lease and  planning permission were ambiguous and had to be interpreted in the light of the SPG, and once that process was undertaken “live/work” had to mean “live and work”.  Of note, the reference throughout the SPG, and the lease, were always to “live/work” and not some other variation such as live and work or live or work

Finding of the Court of Appeal

The lower Court had considered that it should be slow to interpret the planning permission in the light of the SPG where that was not incorporated in or referred to in the relevant grant of planning permission. It also found that, even if reliance was placed on the SPG, it merely confirmed that the reference in the planning permission to “live/work” meant “live and/or work”.

The Court of Appeal agreed with the lower court’s judgment that, “in the very particular circumstances

of this grant of planning permission for this “live/work” unit, the phrase “live/work” meant “live and/or work”.”

Accordingly, it dismissed the appeal and held that the leaseholder was not in breach of the lease or the panning permission.  It took this view because:-

1. The phrase “live/work” in this particular lease was, as a matter of language, ambiguous and could mean “live and work”, “live or work” or “live and/or work”;

2. The relevant plan which formed part of the planning permission showed the whole of the premises shaded as “live/work” which meant that there was no sub-division imposed by the planning permission into separate “live” or “work” areas. This meant that it would be for the leaseholder to determine where to live and where to work. Leaving such matters to the discretion of the leaseholder suggests a permissive approach to the phrase “live/work” meaning that the leaseholder might decide only to live at the premises, or only to work at the premises, or to do both in parts of the premises at their choosing;

3. Because, if it was intended that lawful use of the premises required both living and working and the leaseholder did not so comply and thus might be served with enforcement notices and might ultimately be the subject of criminal proceedings for breach of planning permission, then that would need be spelled out in the planning conditions using language that was clear and unambiguous; and

4. The Court did not consider that the reasonable reader of the grant of planning permission would have regard to the SPG, the earlier plan, or the planning officer’s deferral report. This is because those documents were neither referred to nor incorporated into the grant of planning permission. If, however, regard was had to any of those documents then the Court considered that each of the documents, in any event, supports the interpretation that the phrase “live/work” meant “live and/or work” for this unit.

See the full approved judgment here.

Conclusion

This is yet another case of the court leaning in favour of the leaseholder where the wording in an agreement is in any way ambiguous.  It further highlights the need, when looking to enforce any covenant, to have regard to what the lease actually says and not what you might want it to say but also whether the wording used is prescriptive or, as in this case, permissive and the effect that that may have on the relevant provision.

For more information, please feel free to contact a member of the team on 01435 897297 or info@kdllaw.com.

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