Bevan House Management v Denis Ludwig Becker

Summary

A leaseholder was found to have breached a covenant relating to user of a flat as a private residence only in circumstances in which his tenant had marketed the flat on Airbnb, notwithstanding that he had not caused the breach.

Facts

The Applicant is the freeholder of Bevan House (“the Property”).  The Respondent is the long leaseholder of one of the Property’s 33 flats (“the Flat”).

The Flat’s lease (“the Lease”) contained the following covenants:

1. “The Lessee shall not do or permit or suffer to be done in or upon the Demised Premises anything which may be or become a nuisance or annoyance or cause damage or inconvenience to the Lessor or to the owner or occupier or any other part of the Estate or in any way to behave in such a manner as to cause offence to the Lessor or to such owners or occupiers or whereby any insurance for the time being effected on the Estate or any part thereof may be rendered void or voidable or whereby the rate of premium may be increased and shall pay all costs and expenses incurred by the Lessor in abating a nuisance in obedience to a notice served by a competent authority”
2. “Neither the Demised Premises nor any part thereof shall be used for any illegal or immoral purpose nor shall any trade or business be carried on there nor shall any boarder or lodger be taken but the Lessee shall use the Demised Premises for the purpose of a private residence only”

The Applicant alleged that, in breach of these covenants, the Respondent’s tenant had let the Flat on a short-term, holiday basis between June 2018 and February 2019 and was therefore in breach of the covenant requiring user as a private residence and a breach of the prohibition against business user.  It was also alleged that the user of the Flat for this purpose compromised the Property’s insurance.  The  Applicant had informed the Property’s insurer of the user of the Flat and it stated that, as a result, it was contemplating withdrawing cover and in the interim they would continue to insure but on more onerous terms.

The Respondent admitted to having sublet the Flat to on assured shorthold tenancies since 2007 (this was not in breach of the Lease) and denied a breach of the Lease on the basis that his tenant, who had let the Flat since 2014, had placed the Flat on the short-term holiday let market without his consent.  The Respondent was however aware that his tenant let the Flat on a short-term basis while travelling for work.

Issues

1. Given that the breach of the Lease had been committed by the Respondent’s tenant, was the Respondent in breach of the Lease?
2. Was the placement of the Flat on the short-term holiday let market a breach of the covenant against business user?

Decision

It was held that as the covenant relating to user was in the “passive voice”, i.e. “shall not be used” as opposed to the active, e.g. “not to use”, it did not matter who was responsible for the breach, all that mattered was that a breach had occurred.  The authority of Roadside Group-v-Zara Commercial Limited [2010] EWHC 1950 was cited in support of this proposition.

The case of Borthwick-Norton and Others-v- Romney Warwick Estate Ltd [1950] 1 All ER was cited in support of the proposition that it did not matter that the Respondent was not directly responsible for the breach, and that it was sufficient that the Respondent had knowledge of the breach in the form of letters from the Applicant’s solicitor.

The Tribunal was satisfied that the requirement to use the Flat as a private residence only had been breached by the Respondent’s tenant and therefore the Respondent.

The Tribunal made no finding upon whether there was a breach of the prohibition against business user.

The Tribunal found that the use of the Flat for short lets did affect the Property’s insurance and was therefore also a breach of covenant on that basis.

Comment

This case is a brief yet interesting exploration of the distinction between passive and active covenants.  It was held that the covenant was phrased in passive terms and therefore it did not matter who was breaching the covenant it simply mattered that it was being breached.

However, there is a strong argument that the covenant is in fact in the “active voice”.  There is no reference in the covenant to not permitting or suffering to be done and therefore the covenant could reasonably be interpreted to have been binding only on the Respondent himself in accordance with Riverside.

If the covenant had been held to be in an active voice, it is likely that the following passage in Woodfall at 11.199 would have been applied:

“A covenant not to do something will not generally be broken if the prohibited thing is not done by the covenantor but by a third person. Accordingly, the use covenant in a lease is often widened to prohibit the permitting or suffering of the prohibited activity. A covenant not to permit the carrying on of a prohibited activity will generally be broken if the prohibited activity is carried on by the covenantor himself”.

The Borthwick Norton decision may be distinguished on the basis that the covenant in that case contained a covenant not to do nor suffer to be done and was therefore wider.