Landlord and tenant – Covenant – Company formed for purpose of acquiring freehold of premises – Shares of company owned by lessees of flats in premises – Company obtaining planning permission to construct further flats – Claimant seeking declaration to prevent works – Whether proposed works in breach of lease – Application refused
The claimant was a lessee of a top-floor flat in 169 Queen’s Gate, London, which contained 25 flats. Each of the lessees was required to be a shareholder of the defendant landlord, which was a limited company formed for the purpose of acquiring the freehold of the premises. In 1998 the defendant obtained outline planning permission for the construction of two further flats on the roof of the premises. The claimant objected, claiming that he would be disturbed by the works and would become subject to the sounds of occupation from neighbours above him and that the value of his flat might be affected. He sought summary judgment and a declaration that the proposed development was unlawful in that it was: (i) contrary to the provisions of the lease; and alternatively (ii) in breach of an express covenant on the landlord to repair contained in the lease.
In relation to the first point it was contended that a covenant should be implied prohibiting the defendant from carrying out any development that would increase the number of flats in the building. In support of that contention, it was submitted that there was a “letting scheme”, which was limited to the specific number of flats in the premises and which would be “fatally undermined” by the addition of further flats, since the additional flats would not be able to benefit from, or be bound by, the mutual code of the scheme. It was further submitted that the additional flats would increase the burden on the existing tenants.
Held: The claimant’s application was refused.
1. The lease had not expressly referred to a particular number of flats, and it could not be interpreted as referring only to the flats existing at the date of the lease. That conclusion was endorsed by the fact that the landlord had reserved for itself the right to build and make alterations and additions: Devonshire Reid Properties Ltd v Trenaman [1997] 1 EGLR 45 distinguished
2. In the absence of words in the lease expressing a line demarking the geographical area of the letting scheme, it could be concluded, as a matter of construction, that the boundary was limited horizontally but not vertically. Accordingly, there was no reason why the number of additional flats that could be added should not be limited to what the planning authorities might allow. On that basis, the lease would require the defendant to bring each additional flat within the letting scheme and require the amount that constituted the “proportionate part” of the expenses and outgoings to be adjusted in order to accord with the number of flats.
3. It could not be concluded that there would be an unacceptable increase in the burden on the tenants because, first, any expenses to construct the additional flats or adjust the services were not recoverable from the tenants. Second, the addition of further flats would increase the number among whom the expenses were to be divided, thereby diminishing the burden on the lessee. Third, any profits made from the works might either be distributed as a dividend or kept in reserve to assist in defraying the expenses to which the lessees had covenanted to contribute.
4. The logic behind a principle that a covenant to repair and maintain raised a duty not to destroy wholly or partly was suspect and faintly absurd. Whether the duty not to destroy was absolute depended on the lease: see Woodfall at para 13.063. In construing a covenant, regard was to be had to what the parties had contemplated would be permissible. Under the lease, the defendant had been entitled to execute necessary repairs or alterations and to execute building operations. Therefore the proposed development would not be in breach of the covenant to repair: Devonshire Reid Properties Ltd v Trenaman (supra) not followed.
Anthony Tanney (instructed by DJ Freeman) appeared for the claimant; David Iwi (instructed by Park Nelson) appeared the defendant.
Thomas Elliott, barrister