Lease extension – Covenants – Leasehold Reform, Housing and Urban Development Act 1993 – Appellant’s lease containing covenant to use flat only as to use the flat as private dwelling for the lessee and his family – Appellant seeking to have reference to lessee and family removed from equivalent covenant in new extended lease – Whether those words imposing further restriction beyond requirement to use flat as private dwelling – Whether subletting precluded – Whether appropriate to modify covenant under section 57(6)(a) of 1993 Act for purpose of correcting defect – Appeal dismissed
The appellant held a 99-year lease of a flat on the third floor of a converted house in London EC1. The flat was one of five in the building let on similar leases in 1988. The respondent owned the freehold of the building and was the appellant’s immediate landlord. The lease contained a covenant to use the flat as a private dwelling for the lessee and his family and for no other purpose. On an application to acquire an extended lease of the property, pursuant to Chapter II of Part I of the Leasehold Reform, Housing and Urban Development Act 1993, an issue arose as to the covenants to be included in the new lease. The appellant proposed that the new lease should be on substantially the same terms as the original lease save that the words “for the lessee and his family” should be deleted from the user covenant, making it a covenant only “to use the flat as a private dwelling and for no other purpose”.
In that regard, the appellant submitted that, in principle, a lessee had the right to sublet unless restricted from doing so by clear words and that the user covenant contained no words sufficient to prohibit or restrict dispositions. He contended that the covenant should be interpreted simply as a requirement to use the flat as a private dwelling, since the words “for the lessee and his family” were merely descriptive of a general residential use, imposing no further restriction on the persons who were entitled to use the flat, and the word “lessee” could include a sublessee.
The LVT rejected the appellant’s proposed variation and confirmed that the new lease was to contain the same user covenant as the original lease; it indicated that that covenant was a provision that prohibited or restricted dispositions.
The appellant appealed. He contended that the LVT had erred in its interpretation of the user covenant; alternatively, even if it had not, the covenant should none the less be modified in the terms proposed, pursuant to the power under section 57(6)(a) of the 1993 Act, for the purpose of remedying a defect in the original lease.
Held: The appeal was dismissed.
(1) In the absence of any real ambiguity, the covenant fell to be construed according to the natural or ordinary meaning of the words used, read together with the whole document in which they appeared, and having regard to all of the relevant circumstances of the transaction that would have been known to both parties. It was relevant that the appellant’s lease was one of five similar leases of flats in the building completed in a relatively short period in 1988, each for an identical term, and each granted on substantially the same terms including a covenant restricting the use of the premises to a dwelling for the lessee and his family and for no other purpose. In the context of a residential building comprising flats let on standard terms, which were intended to be enforceable by the lessees against each other through the agency of the lessor, it was not surprising to find an intention to restrict use of the flats to the lessees and their families alone. Considerations of estate management and good housekeeping provided a rational explanation as to why the parties to such a lease might consider it in their mutual benefit to restrict occupation to those with a direct interest in the lease and their families. To an owner-occupier, neighbours who were themselves owner-occupiers might be preferable to neighbours with a more limited interest: Re Lewis Lee’s application [2012] UKUT 125 (LC) applied. The natural and ordinary meaning of the user covenant in the lease was the literal meaning, namely that only the person in whom the lease was vested for the time being as lessee, and his family, could use the flat and that their use had to be as a private dwelling. The words “for the lessee and his family” were additional words of limitation, which could not simply be ignored.
Although the right to deal with leasehold premises in any way that the lessee chose, including by subletting, was an incident of any lease except where it was restricted, it was necessary to read the lease as a whole in order to determine whether, directly or indirectly, the effect of any covenant was to impose such a restriction. The absence of an express covenant against subletting did not necessarily mean that the parties anticipated that the flats would be sublet and did not require that a strained or restricted meaning had to be given to any other covenant, where its natural effect was to limit the category of persons by whom, or the circumstances in which, the premises could be occupied. Although the modern trend was for flats of that type to be acquired by “buy to let” landlords, who would regard any restriction on subletting as unacceptable, considerable care had to be taken before attributing current priorities and expectations to the original parties to leases granted in 1988.
(2) It was not appropriate to order a change in the wording of the covenant pursuant to section 57(6). It was not possible to regard the wording of the user covenant as a “defect”, in the sense of a mistake that neither party could have intended to be included in the lease as originally granted. The covenant had been included deliberately. While it was possible that its consequences might not have been appreciated by the original lessee, it was equally possible that both parties had seen benefits for themselves in the covenant. There was no ambiguity in the covenant was sufficient to bring the section 57(6) jurisdiction into play. If the parties wished to cure the inadequacies of the original drafting, in order to avoid a similar dispute at any point over the extended term, then they could modify the covenant by agreement when the new lease was executed.
James Sandham (instructed by Housing & Property Law Partnership) appeared for the appellant; Matthew Boyden (instructed by Raj Properties Ltd) appeared for the respondent.
Sally Dobson, barrister
Lease extension – Covenants – Leasehold Reform, Housing and Urban Development Act 1993 – Appellant’s lease containing covenant to use flat only as to use the flat as private dwelling for the lessee and his family – Appellant seeking to have reference to lessee and family removed from equivalent covenant in new extended lease – Whether those words imposing further restriction beyond requirement to use flat as private dwelling – Whether subletting precluded – Whether appropriate to modify covenant under section 57(6)(a) of 1993 Act for purpose of correcting defect – Appeal dismissedThe appellant held a 99-year lease of a flat on the third floor of a converted house in London EC1. The flat was one of five in the building let on similar leases in 1988. The respondent owned the freehold of the building and was the appellant’s immediate landlord. The lease contained a covenant to use the flat as a private dwelling for the lessee and his family and for no other purpose. On an application to acquire an extended lease of the property, pursuant to Chapter II of Part I of the Leasehold Reform, Housing and Urban Development Act 1993, an issue arose as to the covenants to be included in the new lease. The appellant proposed that the new lease should be on substantially the same terms as the original lease save that the words “for the lessee and his family” should be deleted from the user covenant, making it a covenant only “to use the flat as a private dwelling and for no other purpose”.In that regard, the appellant submitted that, in principle, a lessee had the right to sublet unless restricted from doing so by clear words and that the user covenant contained no words sufficient to prohibit or restrict dispositions. He contended that the covenant should be interpreted simply as a requirement to use the flat as a private dwelling, since the words “for the lessee and his family” were merely descriptive of a general residential use, imposing no further restriction on the persons who were entitled to use the flat, and the word “lessee” could include a sublessee.The LVT rejected the appellant’s proposed variation and confirmed that the new lease was to contain the same user covenant as the original lease; it indicated that that covenant was a provision that prohibited or restricted dispositions.The appellant appealed. He contended that the LVT had erred in its interpretation of the user covenant; alternatively, even if it had not, the covenant should none the less be modified in the terms proposed, pursuant to the power under section 57(6)(a) of the 1993 Act, for the purpose of remedying a defect in the original lease.Held: The appeal was dismissed. (1) In the absence of any real ambiguity, the covenant fell to be construed according to the natural or ordinary meaning of the words used, read together with the whole document in which they appeared, and having regard to all of the relevant circumstances of the transaction that would have been known to both parties. It was relevant that the appellant’s lease was one of five similar leases of flats in the building completed in a relatively short period in 1988, each for an identical term, and each granted on substantially the same terms including a covenant restricting the use of the premises to a dwelling for the lessee and his family and for no other purpose. In the context of a residential building comprising flats let on standard terms, which were intended to be enforceable by the lessees against each other through the agency of the lessor, it was not surprising to find an intention to restrict use of the flats to the lessees and their families alone. Considerations of estate management and good housekeeping provided a rational explanation as to why the parties to such a lease might consider it in their mutual benefit to restrict occupation to those with a direct interest in the lease and their families. To an owner-occupier, neighbours who were themselves owner-occupiers might be preferable to neighbours with a more limited interest: Re Lewis Lee’s application [2012] UKUT 125 (LC) applied. The natural and ordinary meaning of the user covenant in the lease was the literal meaning, namely that only the person in whom the lease was vested for the time being as lessee, and his family, could use the flat and that their use had to be as a private dwelling. The words “for the lessee and his family” were additional words of limitation, which could not simply be ignored.Although the right to deal with leasehold premises in any way that the lessee chose, including by subletting, was an incident of any lease except where it was restricted, it was necessary to read the lease as a whole in order to determine whether, directly or indirectly, the effect of any covenant was to impose such a restriction. The absence of an express covenant against subletting did not necessarily mean that the parties anticipated that the flats would be sublet and did not require that a strained or restricted meaning had to be given to any other covenant, where its natural effect was to limit the category of persons by whom, or the circumstances in which, the premises could be occupied. Although the modern trend was for flats of that type to be acquired by “buy to let” landlords, who would regard any restriction on subletting as unacceptable, considerable care had to be taken before attributing current priorities and expectations to the original parties to leases granted in 1988.(2) It was not appropriate to order a change in the wording of the covenant pursuant to section 57(6). It was not possible to regard the wording of the user covenant as a “defect”, in the sense of a mistake that neither party could have intended to be included in the lease as originally granted. The covenant had been included deliberately. While it was possible that its consequences might not have been appreciated by the original lessee, it was equally possible that both parties had seen benefits for themselves in the covenant. There was no ambiguity in the covenant was sufficient to bring the section 57(6) jurisdiction into play. If the parties wished to cure the inadequacies of the original drafting, in order to avoid a similar dispute at any point over the extended term, then they could modify the covenant by agreement when the new lease was executed.James Sandham (instructed by Housing & Property Law Partnership) appeared for the appellant; Matthew Boyden (instructed by Raj Properties Ltd) appeared for the respondent.Sally Dobson, barrister