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The ‘Duval’ issue and possible solutions

26th March 2021

We have already reported on the Court of Appeal and then Supreme Court decisions in Duval -v- 11-13 Randolph Crescent Limited (see here) and the effects that it has had on how landlords might approach the granting of licences for works or other matters. It is fair to say that most landlords have acknowledged Duval but have taken a relaxed approach following the decision because, perhaps, most view the circumstances in that case to be, possibly, exceptional. However, whether that is correct or not, landlords, RTM companies, Management Companies and those advising them should remain very live to the risks brought to the fore in Duval and should temper how they deal with granting licence and what advice they seek in relation to the grant within that process.

So what was Duval all about?

In very brief terms, the decision in Duval says that where a lease contains:-

  • an absolute prohibition (in this case it related to certain alterations);

  • a requirement that all leases are granted on the same terms; and

  • a mutual enforceability covenant (requiring the landlord to pursue a complaint of a leaseholder where that complaining leaseholder provides an indemnity to the landlord for its costs);

the landlord should not consent to a leaseholder taking steps that would be in breach of the prohibition. Where the landlord does grant licence in such circumstances, it will likely be liable to the complaining tenant in damages.

What is the effect of this decision?

In some circles the result in Duval has meant (in our view quite properly) that landlords and agents are, on receipt of a request by a leaseholder for licence, seeking advice before embarking on the licence process. That advice is in two stages. Firstly, taking account of Duval, can and should the landlord be granting consent at all, and secondly, if they can then on what terms.

Some landlords are however taking a more relaxed approach (or are perhaps unaware?) based perhaps on the view that Duval was, in certain respects, exceptional and therefore the risk of fall out is low.

How you/your clients approach a request for licence is of course a matter for you/your client but in our view, sound advice is to thoroughly check out the liability potential first and only then move forward with a discussion on the licence.

What is an absolute prohibition?

It is important to distinguish between an absolute prohibition in a lease and one that is qualified, as the principles arising from Duval will not apply to the latter.

An absolute prohibition is, as you would expect, a total ban on a particular thing - for instance, a common absolute prohibition will be against “structural works”, “subletting”, “running a business from the premises” or “the keeping of pets in the premises” amongst other things.

A qualified prohibition is also a ban but which can be lifted/overridden if the leaseholder complies with certain criteria, generally the requirement will be to obtain prior consent from the landlord.

Statute provides that in most cases a landlord must not unreasonably withhold consent where a prohibition is qualified but no such assistance applies to an absolute prohibition.

What does all this mean in practice and what are the solutions?

The (very common) scenario is that you/your client is approached by a property owner who wishes to undertake alterations, have a pet, sublet the property or some other thing which the lease or agreement states is not permitted. You/your client may be of the view that they don’t have an issue with the request and, but for Duval, would perhaps previously have granted consent or even turned a blind eye. What should you do now though?

The first point to make is that you cannot turn a blind eye and you should not simply grant consent without first checking the lease/agreement to check for the three points raised in Duval. Those are of course are

  • an absolute prohibition against the matter for which consent is requested;

  • a requirement that all leases/agreements are to be granted on identical terms; and

  • a mutual enforceability covenant.

If there is an absolute prohibition present then seek advice before proceeding. The possible options for you/your client here are as follows:-

1. Decline to grant consent

Clearly, this may make you unpopular with the requesting leaseholder but it is likely to be the correct decision where the terms of the relevant lease or agreement mean that Duval applies.

If the client wants to grant consent though, it might take one of the following approaches?

2. Obtain consent from those who would be affected if consent was granted

In a smaller block it is possible (but more problematic in larger blocks) and we have assisted clients in obtaining the agreement of all of the other leaseholders to the grant of the specific licence.

3. Section 84 of the Law of Property Act 1925

This statutory provision provides a facility (which we have reported on before here, here and here) that will apply in the case of most long leases allowing the Lands Tribunal to amend or remove a restrictive covenant. Whilst this might apply in various circumstances, it will be of particular use if option numbered 2 above has been followed and there are a number of dissenting neighbouring leaseholders such that a positive response from all of the ‘affected’ leaseholders cannot be obtained.

Clearly, there is, with both options 2 and 3 above, a need for you/your client to have the desire to assist the requesting tenant and it is accepted in some circumstances that desire may be lacking. There is also a cost factor in each of those processes, and a lack of any guarantee of a successful outcome. However, if the requesting leaseholder wishes to obtain licence then those are costs that you/your client will require that the requesting leaseholder covers.

Conclusions

The position arising from the Duval case is one to take seriously and to obtain full advice upon when licence is requested. In most cases we see clients (at our suggestion) successfully require that that advice is paid for by the requesting tenant. The landlord can then proceed (or not as the case may be) to grant licence content that the approach that it is taking ensures that it will not be on the wrong end of a claim like that in Duval later on.

If you have any queries whatsoever on the above points then do seek advice and we of course are happy to assist. We can be contacted at info@kdllaw.com or on 01435 897297.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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