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The Upper Tribunal (UT) has overturned a determination of the First-tier Tribunal (FTT) that a tenant was in breach of a leasehold covenant, finding that the FTT’s decision was too broad and insufficiently precise. The case highlights the importance of carefully assessing both the wording and purpose of leasehold covenants before seeking a formal breach determination.
Legal Background
Under Section 168 of the Commonhold and Leasehold Reform Act 2002, a landlord under a long lease may not serve a notice of forfeiture for breach of covenant unless:
- the tenant has admitted the breach; or
- the breach has been determined by a court or tribunal.
Applications for such determinations therefore carry significant legal consequences and must be approached with care.
Facts of the Case
The tenant lived in a flat within a block of 18 flats. His lease required him to furnish all floors (excluding the kitchen and bathroom) with sufficient carpet and underfelt to minimise sound transmission to other parts of the building.
The tenant undertook alterations, including installing new flooring. Following an inspection, the landlord alleged that the tenant was in breach of covenant by failing to install underfelt and carpet and threatened enforcement action. More than 18 months later, the landlord applied to the FTT for a determination of breach.
By the time of the application, the tenant had laid wall-to-wall carpet in the entrance lobby, hallway and dining room.
FTT Decision
The FTT concluded that a breach had occurred, reasoning that:
- the obligation to carpet with underfelt did not depend on whether sound attenuation was achieved; and
- the carpet had to cover the entire surface area of the relevant rooms.
The FTT’s decision implied that the breach was ongoing. The tenant appealed.
Upper Tribunal: Covenant Must Be Interpreted by Purpose
Allowing the appeal, the UT held that determining whether a breach had occurred required answering two key questions:
- Had the tenant furnished the floors with carpet and underfelt?
- Were those furnishings sufficient to minimise sound transmission?
The UT found that the first requirement would be satisfied if some carpet was present. Importantly, if sound transmission had already been minimised by other measures, even a single rug could potentially satisfy the covenant.
The UT also questioned whether carpets without underfelt could comply with the covenant. It considered it unlikely that the parties intended to impose more prescriptive requirements on home furnishings than necessary. Interpreting the covenant as requiring both carpet and underfelt regardless of effectiveness would be inconsistent with its stated purpose.
The UT therefore concluded that the covenant required only so much carpet or underfelt as was necessary to minimise sound transmission.
No Continuing Breach
On the evidence, there was no indication that additional carpet or underfelt would have further reduced sound transmission beyond what had already been installed. The UT found that:
- any breach had been remedied once the new carpeting was laid; and
- there was no continuing breach at the time of the FTT’s determination.
The FTT’s decision was therefore set aside.
Q&A: Leasehold Covenants and Section 168 Applications
What is a Section 168 determination?
It is a formal ruling confirming whether a tenant has breached a leasehold covenant, which is usually required before forfeiture action can be taken.
Does a covenant have to be complied with literally?
Not always. Courts and tribunals interpret covenants by reference to their purpose, not just their wording.
Can a breach be remedied before a determination?
Yes. If a breach is remedied before the tribunal determines the issue, there may be no continuing breach.
Why was the FTT’s decision criticised?
Because it failed to assess whether the tenant’s flooring actually met the covenant’s purpose of minimising sound transmission.
What lessons does this case offer landlords?
It underlines the need to carefully evaluate the strength and scope of alleged breaches before applying for a Section 168 determination.
Contact Us
Leasehold disputes and covenant enforcement can be complex and high-risk for both landlords and tenants. Our Property Litigation solicitors advise on lease interpretation, Section 168 applications, forfeiture risks and tribunal proceedings.
If you need advice on a leasehold covenant dispute or enforcement strategy, contact Willett & Co Solicitors today for expert guidance.