If a lease contains an “absolute” covenant against alterations, a landlord can charge a premium as there is a ban on an any alterations.
A “qualified” covenant is a covenant against alterations without landlord’s consent. So in this case, a qualified covenant is an implied term that a landlord cannot unreasonably withhold consent and as a consequence cannot charge a premium for consent.
Looking at this from the landlord’s perspective in the case of a collective enfranchisement claim, Schedule 6 of the LRHUDA 93 deals with the price payable by a nominee purchaser. By paragraph 2 the price payable is the aggregate of:
- The value of the freeholder’s interest in the premises as determined in accordance with paragraph 3 of schedule 6.
- The freeholder’s share of marriage value as determined in accordance with paragraph 4 of schedule 6.
- Any compensation payable under paragraph 5 of schedule 6.
The first situation where paragraph 3 applies would be as at the date of claim where a landlord can carry out a proposed development without trespassing on the tenants land and without needing the tenants permission. An example would be where the landlord had reserved himself a flat roof and the right to develop is by building an additional storey.
The second situation where paragraph 4 applies is where one party to a lease can carry out a development but the project is only viable if the developer (whether landlord or tenant) acquires land or a release of a covenant to the other party to the lease. An example would be where a tenant could substantially improve the value of a top floor flat by adding a mansard addition where the landlord owns the roof void; or a ground floor flat by excavating the basement where the landlord owns the subsoil or (in both examples) there is an absolute covenant against alterations.
The third situation where paragraph 5 applies would be where the landlord could develop adjacent land but its ability to do so will be lost or impaired on the enfranchisement of the neighbouring land. An example is where such a development could be carried out in conjunction with the enfranchising premises but which cannot be developed on its own such as a penthouse flat straddling two properties where one of the properties is being enfranchised.
I will expand further on this topic in valuation terms in a following blog.
Watch this space.