Waycourt Ltd v Viscount Chelsea Cadogan Estates Ltd

A lease covenant prohibiting alteration of a property’s plan, layout, height or elevation may regulate internal arrangement as well as the building’s external footprint. Converting storage vaults into kitchen and dining space, together with creating access through a new corridor, amounted to an alteration of layout.

A notice under section 146 of the Law of Property Act 1925 is construed as it would be understood by a reasonable person knowing the lease, the notice and the relevant background. Descriptive wording need not be technically exact if it sufficiently identifies the breach.

The tenant held a lease of two houses divided into flats, including a caretaker’s flat and storage vaults. Without the landlord’s consent, the vaults were converted into kitchen and dining space and made accessible through an additional entrance. The landlords served a notice under section 146 of the Law of Property Act 1925 and sought forfeiture.

The Mayor’s & City of London County Court held that the alterations breached the lease and that forfeiture had occurred, but granted relief on terms. The tenant appealed, arguing that there was no breach and that the notice was defective. The central issues were whether the alterations changed the layout under clause 2(10), and whether the notice sufficiently specified the breach.

The Court of Appeal unanimously dismissed the appeal. Arden LJ gave the principal reasons. Sedley LJ and Chadwick LJ agreed with the dismissal and the essential reasoning.

1. Meaning of layout. Clause 2(10) prohibited alteration of the plan, layout, height or elevation of the demised premises, subject to a proviso permitting internal alterations with the landlord’s prior written consent, not to be unreasonably withheld. The attached lease plan did not show the internal arrangement. In context, layout meant, at least in part, the internal disposition or arrangement of the premises and added something to the expression plan. It was therefore not confined to an alteration of the building’s external footprint.
2. Breach. The vaults had been storage space. They were converted into a kitchen and dining area, and access was created from a corridor which had not previously existed. Those changes constituted an alteration of layout under clause 2(10). It did not matter whether the vaults were properly part of the caretaker’s flat. Nor was it necessary to decide whether opening the additional entrance separately injured the walls.
3. Section 146 notice. Forfeiture for breach of covenant required a notice specifying the particular breach. Applying the approach derived from Mannai Investment Co Ltd v Eagle Star Insurance Co Ltd [1997] AC 749, the notice was construed from the perspective of a reasonable person knowing the lease, notice and relevant background. The reference to a new opening in the rear wall of the light well was descriptive of the breach, rather than an exhaustive statement of it. A reasonable recipient would understand that the complaint concerned conversion of the vaults into living accommodation and unblocking the other entrance.
4. Disposition. The notice was sufficient and the judge was correct to find a breach and entitlement to forfeit. The tenant’s claim for a declaration was not pursued, and it was accepted that consent had not been unreasonably withheld. The effect of the 1987 licence and whether the vaults formed part of the caretaker’s flat did not require determination. Appeal dismissed.

• Court of Appeal (Civil Division): In [2006] EWCA Civ 511, the court dismissed the tenant’s appeal and upheld the finding of breach, the entitlement to forfeit and the sufficiency of the notice.
• Mayor’s & City of London County Court: HHJ Marr Johnson held that forfeiture had occurred and granted relief from forfeiture on terms.