Landlord and tenant — Whether landlord entitled to create additional flat in roof space — Whether creation of flat would breach landlords’ covenant to repair roof — Whether implied term that landlords covenanted not to create further leases
On December 17
1994 the leasehold valuation tribunal for the south east assessed the
reversionary value on four 999-year leases of a building of four flats in the
sum of £600. The freeholder appealed
contending, inter alia, that the tribunal had failed to take into
account the value of the right to create a fifth flat in the roof space of the
building for which it had planning permission.
The leases each contained provisions enabling the freeholder to recover
the costs of repair and maintenance of the building, including the roof. Each lessee paying a proportion of the costs
which the rateable value of his flat bore to the total rateable value of all
the flats.
The landlords’ proposed work of creating a flat in the roof space would
constitute a breach of the covenant to maintain, repair, redecorate and renew
the roof. The intention of the parties was obvious from the form in which the
leases had been drawn. The costs of maintenance were to be shared equally among
the four lessees of the flats in the building, with the necessary implication
that the parties did not contemplate any beneficial occupation of the remainder
of the premises either by the lessors or anybody holding under them. Care had
been taken to ensure mutuality of covenants in the leases; it was necessary in
order that there should be mutuality among them that they should be restricted
to the number recited at the beginning of each lease, namely four. It was
necessary to imply a covenant into the leases to carry out the intention of the
parties that the lessors would not create within the building more than four
leases. That covenant would be breached if the works contemplated were carried
out.
The following
case is referred to in this report.
Gange v Lockwood (1860) 2 F&F 115
Michael
Daiches (instructed by Morgan Bruce) appeared for the appellants; Jonathan
Small (instructed by Donne Mileham & Haddock, of Brighton) represented the
respondent.
Giving his
decision, Judge Rich QC said: There falls for
decision the determination of a preliminary point which I have directed should
be tried in the course of an appeal against the decision of a leasehold
valuation tribunal given on December 17 1994 whereby the tribunal assessed the
value of the reversionary interest on some leases of four flats at 1 Wilbury
Gardens, Hove, East Sussex, in the sum of £600. The appellants maintained
before the tribunal and would have wished to maintain before this tribunal that
the sums capitalised in order to arrive at the figure of £600 did not take into
account the totality of the receipts to which the reversioner was entitled
under the leases and would also have wished to urge that the years’ purchase
adopted by the leasehold valuation tribunal was insufficient. But the main
thrust of the appellants’ case before the leasehold valuation tribunal and the
main subject-matter of their appeal was that the leasehold valuation tribunal
had included nothing in the price of the reversion for the value which the
appellants maintain attaches to the reversion by reason of the opportunity to
create a fifth flat within the roof space of the building in which the four
flats, whose reversions are thus valued, is contained.
I came to make
a direction for a hearing of a preliminary issue in the following
circumstances. The appellants applied on June 25 1995 for an order that the
hearing which had been fixed for the 27th and 28th should be adjourned. I do
not think it appropriate to rehearse the reasons for my concluding that that
was not an application which I ought to grant, but it did transpire in the
course of the application that the main reason for it was that the appellants
wished to reconsider the evidence which they would wish to place before this
tribunal in regard to the valuation of this right which they claimed to create
a fifth flat in the roof space of the building. That right was said by the
respondent to be precluded by reason of the provisions of the leases. It was in
those circumstances that I thought that the fears of the appellants of not
having a fair hearing of the real issue in the case could be overcome if I
determined first whether or not they did indeed, as a matter of the true
construction of the leases, have a right to create a fifth flat in the roof
space. If they did have such right then it would be appropriate to give them
some time in which to ensure that proper evidence as to its proper value was
placed before this tribunal; but if they did not have such right their appeal
would be concerned with only a derisory issue concerning whether the £600 was a
sufficient valuation of the ground rent or whether the sum should be varied by
some modest number of pounds.
In those
circumstances, upon the appellants undertaking that they would not pursue those
other matters of appeal and would submit therefore to the appeal being
dismissed without further hearing if the preliminary issue was determined
against them, I ordered the hearing of this preliminary issue as to whether on
a true construction of the leases subject to which the appellants hold the
freehold, the development for which planning permission was granted on October
19 1991, as shown in plans placed by Mr Fridell before the leasehold valuation
tribunal, can lawfully be carried out. Those plans, it is agreed, show the
variation of the existing roof of the building by the insertion into it of
dormer windows; apart from that they show no construction works upon any part
of the building which has been included in the demise to any of the four
existing tenants of the block and it is agreed that either there has been
retained, as undemised property of the reversioner, a means of access to the
roof space or the reversioner has an easement providing such access, and, for
the purposes at least of the consideration of this issue, I will assume that
that access will be sufficient, although I suspect it may be barely sufficient
and difficult in order to enable the proposed works to be
included within any demise out of the freehold of which the appellants are a
reversionary owner.
The building
in which these works are proposed is let in four leases all for a term of 999
years from Christmas 1963 at ground rents. The terms of each of the four leases
are identical at least so far as is here material. Each contains a covenant by
the lessors at clause 5(4)(a) that:
subject to
contribution as is herein provided (and that is a reference to Clause 7 to
which I will return shortly) and except to such extent as the lessee or the
tenant or any other part of the building shall be liable in respect thereof
under the terms of this lease or any other lease, the lessor will maintain,
repair, redecorate and renew (a) the structure of the building and in
particular the roof.
Clause 7 provides
that the reversioner can recover from each of the lessees a proportion equal to
that ratio which the rateable value of each flat has to the total rateable
value of the four flats, of the money actually spent ‘on maintaining and
managing the building during the year’. If the proposed works are to any extent
works of maintaining or managing the building, then the cost of them to that
extent is recoverable from the four lessees. That appears to me to be a proper
matter to note in seeking to construe the words in clause 5(4)(a) by which the
lessors bind themselves to maintain, repair, redecorate and renew. I take
maintaining in clause 7 to embrace the four kinds of work described in clause
5(4)(a) as maintain, repair, redecorate and renew.
I have been referred
by Mr Jonathan Small to a recent work concerning dilapidations in leasehold
premises. There reference is usefully made to a general principle that an
obligation to repair contains a duty not to destroy. The learned authors of
this work say that a covenant to repair imposes not only a positive duty to
repair but also a negative obligation not to destroy the demised premises in
whole or in part. Thus, they say, in Gange v Lockwood (1860) 2
F&F 115 where the tenant of certain rooms in a house opened two doorways in
the walls between the house and an adjoining house, Willis J directed the jury
in the following terms:
A covenant to
repair, uphold and maintain or keep in good repair raises a duty not to destroy
the demised premises and the pulling them down, wholly or partly, is a breach
of such covenant.
I take that
citation from the judgment of Willis J to be accurately recorded in this text
book and I accept and adopt the direction of Willis J as thus formulated. In my
judgment, a covenant to repair and maintain raises a duty not to destroy wholly
or partly and a proposal to do so is a breach of such covenant. The proposed
works involve such an intention and would, unless there were some grounds for
construing this particular covenant differently, constitute therefore a breach
of the covenant to maintain, repair, redecorate and renew.
Mr Michael
Daiches urges on me entirely properly that the direction of Willis J appears to
have been given in a case where a tenant’s covenant was being construed and at
least in terms of a restriction upon the ability of the lessors to deal with
that which is their own property it may not be so appropriate to construe the
lessors as having a negative obligation not to destroy as opposed to the
positive duty to repair; but there are two reasons for rejecting that
submission as to the construction of this covenant. The first is that the
lessees in the particular circumstances of this covenant have a significantly
greater interest in the ability of the lessors to deal with the premises
retained by the lessors than has the lessors, first, because they have the
residue of a 999-year term in respect of their flats and so far as the part not
demised is concerned it appears to be, for reasons which I will explain in the
context of the second reason for answering the preliminary issue in favour of
the respondent which I will give, the sole concern and function of the parts
retained by the lessor in practice is to serve the parts which have actually
been demised. But, second, the reason for rejecting the distinction which Mr
Daiches has made is that which I have already referred to, that if the covenant
permits under the head of maintenance the cutting into the roof and the
changing in its form, then the cost of undertaking such work can be charged to
the lessees, thus they have the greater interest in the scope of the work than
does the lessor. The four words which I have read must all be construed as
having some separate force so far as possible even though the word ‘repair’ may
well include and overlap with the obligation to redecorate and renew and even
to maintain. The obligation to maintain in its natural meaning appears to me to
mean to keep in its existing form. The obligation to renew may contemplate not
merely the replacement of that which exists but even its replacement by
different materials but reading the two together I think that an obligation to
maintain and renew permits only such renewal as is consistent with the
obligation to maintain, that is to say the maintenance of the existing form
even if not the existing material of that which is to be maintained, repaired,
redecorated and renewed. That which is proposed in respect of the roof departs
from that restriction imposed by the covenant, and therefore could not be
carried out, in my judgment, other than in breach of the covenant, and for that
reason I would answer the preliminary point in the sense which I have
indicated, that is to say as contended for by the respondent.
But issue was
joined before me at greater length and possibly directing attention to a more
difficult issue as to whether or not the proposed works are not in any case
precluded because the proper construction of these leases is that the lessor is
under an obligation not to create within the building more than the four flats
which are referred to in the lease. In order to address this point I must make
some further references to the provisions of the leases. They recite at recital
2 that the lessors have previously granted leases of, or intends hereafter to
grant leases of, the three flats in the building other than the premises hereby
demised. The building as I have indicated is the whole building including those
parts which are not the subject of any of the four demises including, as I have
said, the roof space. The recital goes on:
And the
lessor has in each lease imposed and intends in every future lease to impose,
the restrictions set forth in the First Schedule hereto to the intent that any
owner or lessees for the time being of any flat in the building may be able to
enforce the observance of the said restrictions by the lessees of the other
flats.
The
restrictions referred to in the first schedule are restrictive covenants as to
the proper conduct of the occupiers of each flat in their own premises such as
to avoid disturbance to their neighbours and restrictions as to the use of the
common parts in a way which may cause annoyance to their neighbours. Mr Daiches
accepts, and indeed contends, that that recital prefaces the creation of a
letting scheme among the four proposed and actual lessees such as to create
mutual enforceability of those restrictive covenants.
Mr Small for
the respondent has sought to persuade me that the recital is properly to be construed
as itself being a covenant to create the number of leases there referred to and
no more than that number. I do not think that it is material to consider
whether properly it is a covenant to create the number of leases there referred
to but I think that I would accept that submission. I do not think that it
justifies a conclusion that it is of itself a covenant to create no more than
that number of leases and even if it were, I do not think that it will answer
the question which I have to determine under the preliminary issue, namely
whether or not the leases prevent the building work which is proposed by the
appellants.
The reason why
I have doubted as to whether or not these recitals can properly be construed as
themselves creating covenants, is because there is in fact an express covenant
within the body of each lease at clause 5(2) whereby the lessors covenanted
that the lessors will require every person to whom they shall hereafter grant a
lease of any flat in the building to covenant to observe the restrictions set
forth in the first schedule hereto. That covenant I construe, and I think Mr
Daiches accepted, was a covenant to obtain from each lessee a covenant not
merely with the lessors but also with the other lessees as contemplated by the
recital and in the form that the lessee in each lease actually covenants in
regard to the first schedule at clause 3 of the lease, which provides that:
The lessee
hereby covenants with the lessor and with the owners and lessees of the other
flats comprised in the building, that the lessee and the persons
restrictions set forth in the First Schedule hereto.
Thus, the
express obligation accepted by the lessor was to ensure the creation of that
mutual arrangement of covenants with a right of each lessee to enforce against
the other, contemplated by the recital and imposed by clause 3 of the lease.
Mr Daiches
accepted and indeed contended that it is of the nature of a letting scheme that
its scope has to be determined at its outset. The clauses to which I have
referred create thus a mutuality of covenants and Mr Daiches accepted and
indeed contended that the requirement that the scope of a letting scheme shall
from its beginning be certain and determined precluded, at least on the form of
words adopted in the recital, there being added to that system of mutual
covenants the owners of any fifth flat that might be created in the building.
Thus, the position is achieved under the leases that if the lessors have, as
they contend, a right to create within that part not demised to any of the four
tenants a further dwelling, that dwelling will of necessity be outside the
letting scheme contemplated by each of the four leases and established by each
of the four leases. If that is what is the effect of the leases then so be it,
the lessors have the rights that they contend for and that is what Mr Daiches
seeks to persuade me to conclude.
It would
appear to me that that conclusion must follow unless I am satisfied that it is
necessary to imply into each of these four leases a covenant that the lessors
will not create within the building more than the four leases contemplated. I
am entitled to imply such a covenant only if it is necessary to do so in order
to give business efficacy to the leases and in order to carry out the intention
of the parties to the leases as objectively ascertained from the leases.
In my
judgment, the intention of the parties to the leases is obvious from the form
in which those leases have been drawn. Two things are absolutely apparent; the
first is that the costs of maintenance in so far as the obligations fall upon
the lessor should be shared in their entirety among the four lessees of the
flats within the building. That carries with it the necessary implication that
the parties did not contemplate any beneficial occupation of the remainder of
the premises either by the lessor or by anybody holding under them. The second
thing that, in my judgment, is clearly apparent is that great care has been
taken to ensure a mutuality of covenants among the lessees. It is necessary in
order that there shall be mutuality among them all that they should be
restricted to the number recited at the beginning of each lease, namely four.
Mr Daiches has suggested that the intention was for a letting scheme for four
flats and that therefore it is not necessary to assume an intention not to have
a fifth flat, but I think that the correct construction of the intention of the
parties was that it was the intention to create a letting scheme between all
the lessees occupying the building and that therefore it is necessary to
restrict them to the number recited upon the determination of the scope of the
letting scheme, namely the four referred to in each lease. For that reason I am
satisfied that it is a necessary implied term in order to carry out the
intention of the parties objectively ascertained in regard to these leases, to
imply a covenant that the lessors will not create within the building more than
the four leases referred to in each of the four leases. That covenant would
likewise be breached if the works contemplated by the appellants were carried
out and for that reason also I will therefore answer the preliminary issue in
favour of the respondent.
Appeal dismissed.
