Lease Interpretation: Whether the phrase ‘live/work’ should be interpreted as ‘to live and work’ (AHGR Ltd v Kane-Laverack and another – 2023)

Where a lease contains the phrase ‘live/work’, should this be interpreted as a lease ‘to live and work’ at the demised premises?

The background

AHGR Ltd v Kane-Laverack and another [2023] concerned a mixed-use development in Bermondsey, London comprising residential flats, office units and one ‘live/work’ unit at Unit 8, of which the appellant was the freeholder and the respondents the leaseholders. The local planning authority produced Supplementary Planning Guidance in 1999 containing planning guidance around ‘live/work development in Bermondsey Street’.

The premises were let on a 999-year lease, which contained a covenant on the part of the leaseholder “not to use or permit the use of the demised premises…otherwise than as a live/work unit in accordance with the… planning permission…”.

The leaseholders, Peter and Luke Kane-Loverack, worked as a barrister and a doctor. The freeholder argued that the terms of the lease required the leaseholders to both live and work at the property, but that the activities carried out by the leaseholders at the property, which included writing books and papers, and consulting with patients over the phone, did not properly constitute ‘work’.

The freeholders claimed damages of £60,000 for breach of covenant, contending that ‘live/work’ required the leaseholders to ‘live and work’ at the premises, rather than offering a choice of whether to ‘live and/or work’ there.

The High Court found in favour of the leaseholders, stating that the leaseholders were entitled to ‘live and/or work’ at their unit, and that the activities they were undertaking were sufficient to constitute ‘work’ in any event. The freeholders appealed further to the Court of Appeal, arguing that the phrase ‘live/work’ was ambiguous and should be interpreted in line with the Supplementary Planning Guidance, which would suggest that the term means ‘to live and work’.

The decision

The Court of Appeal dismissed the freeholder’s appeal, finding in favour of the leaseholders.

The parties agreed that the phrase was ambiguous, with several possible interpretations. The planning permission referred only to ‘live/work’, with no division of areas in which to ‘live’ or ‘work’. Accordingly, the leaseholders themselves could choose where to live and work; they may do both at the premises, or only ‘live’ or only ‘work’.

Although the planning permission for the development did not make reference to the Supplementary Planning Guidance or to a deferral report by the planning officer, the Court of Appeal nevertheless found that both documents supported interpretation of the phrase as meaning ‘to live and/or work’.

Advice and action for landlords

Although very much a case that turned on its facts, this is a useful point of reference for interpretation of provisions where terms are ambiguous.

The Court of Appeal made reference to a ‘reasonable reader’ in its decision, finding that a planning permission which permitted ‘living and/or working’ was right. A leaseholder may become subject to proceedings for breach of planning permission, and so any positive requirement that the premises are used for both living and working would be made clear, without ambiguity.

In this context, the phrase ‘live/work’ could be interpreted as ‘to live and/or work’, and it is open to the leaseholders to choose how they wish to occupy the flat.