On 28 October 2022, the High Court handed down judgment in the case of Alma Property Management Ltd v Crompton And Another [2022] EWHC 2671 (Ch). 

In this case, the (freeholder) Claimant sought an order for specific performance of the (leaseholder) Defendants' repairing obligations under a lease of the common parts of a block of flats called North Tower in Manchester.

Originally, the Defendants were appointed as receivers by the Claimants, pursuant to the lease of the common parts. However, after their receivership terminated in 2016, the lease remained vested in the Defendants.

The cost of repairing the common parts was estimated to be in the region £1million.

After the claim had been issued, the Defendants sought the Claimants consent to assign the lease of the common parts to a company owned by the Defendants (which also held the head lease of the individual flats and was liable to contribute to half of the cost of the works).

The Claimant gave its consent to the assignment, but on the condition that the Defendants entered into an authorised guarantee agreement (“AGA”). The Defendants brought a counterclaim seeking a declaration that the condition was unreasonable and therefore consent for assignment had been unreasonably withheld.

Accordingly, the issues that the Court had to consider included:

  1. Whether the Claimant should be awarded specific performance against the Defendant in respect of the repairing covenants in the lease of the common parts;
  2. Whether the Defendants (as receivers) were entitled to be indemnified by the Claimant in respect of the works; and
  3. Whether the Claimant had sought to impose an unreasonable condition when granting its consent to the assignment of the lease.

Judgment 

The Court dismissed Alma’s claim for specific performance, applying the guidance of the Court in Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch. 64. In particular, it held that Alma already had an appropriate remedy on its hands, in that it could carry out the works itself and recover the costs from the Defendants under the lease. 

The Court also held that it would be wrong to make an order for specific performance on the basis that the Defendants originally held the lease, as receivers, for the benefit of the Claimant and were acting as their agents. Therefore, they were entitled to be indemnified by the Claimant, in respect of their liability for the works, under Section 37 of the Insolvency Act 1986.

In relation to the counterclaim, the Court applied the guidance in Mount Eden Land Ltd v Straudley Investments (1997) 74 P & CR 306 and held that the Claimant was seeking to enhance its rights by making its consent conditional on the Defendants entering into an AGA and, therefore, the proposed condition was unreasonable. The Court did acknowledge that in ordinary circumstances it would have been reasonable for the Defendants to be required to give an AGA. However, as the Defendants took the lease for the benefit of the Claimant, it was unreasonable to require the Defendants to subsequently enter into an AGA. 

Comment 

Whilst the Court’s judgment in this case does not create any new law, the Court’s detailed analysis provides a valuable reminder of the key principles relating to the enforcement of leasehold covenants and the basis upon which receivers hold property. 

If you have any questions in relation to this case, or any related matters, please do get in touch.