Elizabeth Dwomoh takes a look at a case concerning whether a landlord’s right to develop the roof of a building was proscribed under the terms of the leases and letting scheme.
Key points
- An express reservation of a right to develop roof not required when roof is not demised
- Negative and positive covenants are mutually enforceable under a letting scheme
A landlord’s right to develop the roof of a block of flats is subject to a number of factors. In assessing the viability of such a development, a prudent landlord should have regard to the terms of the leaseholders’ leases. In Vectis Property Co Ltd v Cambrai Court Management Co Ltd [2022] UKUT 42 (LC); [2022] PLSCS 38 the Upper Tribunal (Lands Chamber) had to determine whether a landlord was prohibited from undertaking such development by virtue of the terms of the lessees’ leases and the letting scheme in existence.
Right to develop
Cambrai Court, 130 Aldermans Hill, London N13 4QH, is a block of nine flats, all let on long leases. It has a flat roof. The parties to the lease were the appellant landlord, Vectis; the lessee of the flat; and the respondent management company and nominee purchaser, Cambrai. The tripartite leases were all in identical terms.
In 2018, Vectis was approached by a developer with an offer to buy the freehold so that it could build two additional flats on the roof. In 2019, Vectis served notice on the lessees giving them the right of first refusal. In response, the lessees chose to exercise their right to collectively enfranchise the building. Vectis admitted the claim – the only dispute between the parties was the premium payable.
Cambrai argued that the premium payable was £24,500, with the development hope value being nil. Cambrai argued that, under the terms of the leases, Vectis did not have a right to develop the roof.
First, Vectis had not expressly reserved the right to develop the roof space. Second, the addition of the flats would restrict Cambrai’s right of access to, and obligation to repair, the roof. Lastly, the block’s letting scheme precluded the addition of further flats.
The First-tier Tribunal found that Vectis was not required to reserve any rights over the roof and the airspace above as neither had been demised to the lessees. The UT upheld this finding.
A landlord was unrestricted in what it could do with land or areas it had retained. This right was not absolute. A landlord’s right to develop retained land was subject to the non-interference with the lessees’ rights.
Right of repair
The proposed additional flats would cover nearly all of the existing roof, which would effectively become inaccessible from above. The FTT found that Vectis was precluded from developing the roof because it would prevent Cambrai from exercising its right to access over, and obligation to maintain, the existing roof. As Cambrai could obtain an injunction to prevent such development, Vectis had no right to carry out the same.
Relying on Arnold v Britton [2015] UKSC 36; [2015] EGLR 53, the UT in construing the leases observed that the natural and ordinary meaning of Cambrai’s repairing obligation was that it would be required to repair and maintain whatever roof was in place from time to time and not only the existing roof.
To construe the covenant otherwise would fly in the face of commercial common sense.
The purpose of the covenant was not to prevent Vectis from developing the property, but to provide shelter for the building. The new roof covering the additional flats would become part of the “building” as defined within the leases. Any responsibility to repair the roof would therefore attach to the new roof. Cambrai’s repairing covenant in respect of the roof and its rights of access over it would therefore be preserved, albeit in relation to the new roof and what remained of the existing roof. The FTT had erred in determining otherwise.
Letting schemes
A letting scheme arises where properties within a defined area are let on identical or similar terms, usually by the same lessor. The intention is that terms are to be mutually enforceable, not only as between the lessor and the lessee, but also as between the various lessees.
The lessees of Cambrai Court were all subject to a letting scheme, by virtue of their leases. Cambrai argued that the letting scheme precluded Vectis from building additional flats. Further, such a term could be implied by virtue of the fact that the service charge provisions of the leases required each lessee to pay one-ninth towards the service charge. The addition of extra flats would make that provision unworkable.
In rejecting Cambrai’s submissions, the UT noted that letting schemes did not, in general, limit the number of units that could be added to a block. Further, there was nothing preventing the letting scheme being extended to cover the additional flats with a term implied into the leases to adjust the service charge proportions payable under the same. The UT also found that the terms of the letting scheme required Cambrai to be a party to the leases of any new flats that were constructed.
Interestingly, the UT took the view that positive covenants as well as negative covenants were mutually enforceable under a letting scheme.
Elizabeth Dwomoh is a barrister at Lamb Chambers
