Landlord and tenant – Breach of covenant – Burden of proof – Respondent landlord alleging appellant tenant in breach of covenant by permitting or suffering use of premises for immoral acts – First-tier Tribunal concluding immoral activities carried on in flat in breach of covenant – Appellant appealing – Whether sufficient evidence of prohibited use adduced to discharge burden of proof – Whether FTT’s reasons and findings of fact adequate – Appeal allowed
The respondent owned a building at 15 Westgate Terrace, London SW10 which comprised five flats. The appellant acquired the extended 999-year lease of one flat which she sublet to another person.
The lease included covenants by the tenant not to use or permit the flat to be used except as a private residential flat in the occupation of one family, their guests and staff only; and not to use or permit use for business purposes. It also included a restriction not to do or permit or suffer in or upon the demised premises any illegal or immoral act.
In February 2019 the respondent applied to the First-tier Tribunal (FTT) under section 168(4) of the Commonhold and Leasehold Reform Act 2002 seeking a determination that the appellant was in breach of covenant by subletting the flat to a tenant who used it for the purposes of a brothel. The complaint against the appellant was that she had refused to acknowledge what was going on in her flat or take steps to prevent it.
The appellant did not admit the breach. She said when she became aware of complaints relating to her flat, she asked a manager to deal with it because she was seriously ill. She maintained that she had instructed him to take legal steps to recover possession of the premises and the tenancy was ended.
On the evidence, the FTT considered that it was entitled to conclude that immoral activities were being carried on in the flat in breach of covenant and it was irrelevant that no criminal proceedings had been instituted.
The appellant appealed contending that: (i) the evidence before the FTT was not sufficient to support a finding of fact that the appellant’s flat was being used for immoral acts or otherwise in breach of covenant; and (ii) even if the FTT was entitled to reach that conclusion, it had not made any finding that the appellant herself had permitted that use, or suffered it to continue.
Held: The appeal was allowed.
(1) The FTT was entitled to make a finding that the flat was being used for prostitution on circumstantial evidence. That evidence was considerable and capable of supporting the inference that sexual services were being provided to visitors at the flat in return for payment. It was the totality of that evidence, and not its individual components in isolation which justified the inference: Together they provided material from which the inference could be drawn that the flat was being used in breach of covenant.
(2) In a covenant not to permit a certain use, the word “permit” meant either to give leave for something which without that leave could not legally be done, or to abstain from taking reasonable steps to prevent the act which it was within a person’s power to prevent. A person under a covenant not to use premises in a particular way could not commit a breach of covenant except by his own act or that of his agent. The same was true of a covenant not to permit. It was not sufficient to show that the premises had been used in a way which would constitute a breach of the covenant; it further had to be shown that the user was by the defendant or his agent, or that it was permitted by that person. A tenant might be guilty of a breach of covenant consisting of permitting or suffering a prohibited use if the use had been permitted or suffered by the tenant’s agent, assuming that the functions of the agent included the management of the premises. In determining whether a tenant had omitted to take steps which it was reasonable to take, all of the facts and circumstances had to be taken into account. The question was whether a reasonable person in the position of the tenant would have taken steps to prevent the prohibited use which the tenant failed to take: Berton v Alliance Economic Investment Co [1922] 1KB 742 applied.
(3) The purpose of proceedings under section 168(4) of the 2002 Act was to establish the facts on which steps to forfeit a valuable lease would then be founded. Before forfeiture proceedings might be commenced, the landlord was required by section 146(1) of the Law of Property Act 1925 to serve a notice “specifying the particular breach complained of” and if that breach was remedied and compensation was paid no forfeiture would occur. Before a section 146 notice might be served, the FTT had to determine that the breach had occurred. It followed that the determination required of the FTT had to be sufficiently specific to provide the basis of a section 146 notice which had to be construed as a whole in a common-sense way, so that no lessee could have any reasonable doubt as to the particular breaches specified. The same degree of transparency was required of a determination of breach by the FTT. Without it the landlord would not be able to serve a sufficiently specific section 146 notice: Akici v LR Butlin Ltd [2006] 1 WLR 201 followed.
(4) It was essential that the court was in a position, from the FTT’s decision, to assess the seriousness of the breach, the culpability of the appellant and the appropriate response to an application for relief against forfeiture. In the present case, the FTT made no findings of fact about what the appellant did or the effects of the steps she took. The sequence of events after the appellant first received complaints was unclear. The FTT made no findings as to the extent of the manager’s knowledge or his responsibility; nor did the FTT give itself any relevant direction concerning his role. Those were significant omissions. The evidence could be interpreted in different ways and it was not possible for the Upper Tribunal to substitute findings of its own.
The FTT’s decision could not stand because it failed to make the necessary determinations of fact to support its finding of breach of covenant. The matter would be remitted to the FTT for consideration by a differently constituted panel.
Alexander Hickey QC (acting pro bono) appeared for the appellant; Robert Bowker (instructed by Keystone Law) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Marchitelli v 15 Westgate Terrace Ltd
