The application of Braganza
The adoption of a rationality requirement, often referred to inappropriately as a “Braganza duty”, has already been carried through into the landlord and tenant relationship. Braganza has been applied to landlord consents, decisions about service charge expenditure, and as to which repair remedy to adopt. Further afield it has also been applied in the freehold covenant and mortgage contexts. 
However, to date, the frontier of Braganza’s reach has not yet extended to the exercise of a landlord’s contractual remedies; such as forfeiture and Jervis v Harris (self-help repair) type clauses (Jervis v Harris [1996] 1 EGLR 78). This article will examine three things: (i) why the Braganza “duty” ought not to apply to contractual remedies in the landlord and tenant context, (ii) even if it applies, then it should be satisfied easily, but (iii) as a matter of policy, even an easily passed test is problematic. 
Lady Hale summarised the principle as follows in Braganza:
“Contractual terms in which one party to the contract is given the power to exercise a discretion, or to form an opinion as to relevant facts, are extremely common. It is not for the courts to rewrite the parties’ bargain for them, still less to substitute themselves for the contractually agreed decision-maker. Nevertheless, the party who is charged with making decisions which affect the rights of both parties to the contract has a clear conflict of interest. That conflict is heightened where there is a significant imbalance of power between the contracting parties as there often will be in an employment contract. The courts have therefore sought to ensure that such contractual powers are not abused. They have done so by implying a term as to the manner in which such powers may be exercised, a term which may vary according to the terms of the contract and the context in which the decision-making power is given.”
Three points can be drawn out: (i) the focus is on a contractual power; where (ii) there is a conflict of interests; and (iii) there is no one principle for universal application: the terms and context of the contract will dictate what, if any, term is to be implied.
In light of that, it is perhaps unsurprising that a qualified covenant against assignment or alterations should be subject to a duty to act rationally: see Victory Place Management Co Ltd v Kuehn [2018] EWHC 132 (Ch); [2018] PLSCS 17 and No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2021] EWCA Civ 1119; [2021] EGLR 37. In such cases, the parties have specifically envisaged that an application for consent would be made; it would be rather odd if the parties had intended for the envisaged application to be dealt with capriciously or irrationally.

Limitations of application
Although no such case has yet been argued, it must be presumed, by contrast, that no such duty could be implied where there was an absolute covenant: there is no unilateral contractual power or decision-making affecting both parties’ rights. Of course, in practice, the landlord nonetheless has a discretion (whether to consent to an action which would otherwise be a breach). That distinction is important: the term is not implied simply to mitigate against a contractual imbalance of power; it can only be implied where the discretion is provided for within the contract. 
Similarly, in the service charge repairing context it makes sense: see Waaler v Hounslow London Borough Council [2017] EWCA Civ 45; [2017] EGLR 19 and London Borough of Southwark v Baharier [2019] UKUT 73 (LC). As Lewison LJ put it in Waaler:
“…where a contract, in this case a lease, empowers one party to it to make discretionary decisions which affect the rights of both parties, the law recognises that the exercise of that discretion gives rise to a potential conflict of interest. That is all the more so where the discretionary decision of one party to the contract imposes a financial liability on the other. The solution which the law has devised in those circumstances is to restrict the exercise of the discretion to what is rational.”
Jervis v Harris
It is suggested that a contractual remedy ought to be regarded rather differently. Taking a Jervis v Harris clause as an example, this is an altogether different beast. First, the tenant must have committed a breach (ie permitting a disrepair). Secondly, the parties have already agreed, in the contract itself, on the procedure to deal with such breach of contract (eg a notice procedure of two months is common). Thirdly, contractually, the tenant has the option of avoiding the liability (by carrying out the correct remedy). Fourthly, remedies are already available to a tenant if a landlord oversteps the mark: injunctions or damages for trespass or breach of the quiet enjoyment covenant, etc.
Therefore, while such a clause provides the landlord with a unilateral discretion in practice (ie whether to exercise the right or to pursue a different remedy, such as specific performance) it is not a contractual discretion of the type envisaged in Braganza precisely because it is remedial, reliant on a prior breach and for which there is no disparity of power. To put it another way, such a right is self-policing given the contractual prerequisites and procedures. There is neither need nor scope to imply a further layer of restriction. 
A similar analysis must apply to forfeiture; it arises only on breach, there are already statutory notice provisions (and often contractual ones too), and there is always the right of relief. Why should a landlord’s decision whether to seek to forfeit be subject to additional scrutiny? These are practical decisions for the landlord only after the tenant is in breach and in a context where there is a contractual and/or statutory opportunity to obtain relief. 
Of course, even if a duty were to be implied, in such a context the requirements for satisfaction must be minimal. It ought not to be difficult for a landlord to satisfy in either case the Braganza duty: a tenant in breach who refuses to remedy that breach ought to give all bar the most incompetent or unreasonable landlord a supportable rationale for the decision. Indeed, we also know that, so long as the decision would be made in the same way for the good reasons, even the inclusion of a bad reason will not mar the process so as to render it irrational. 
Of course, as a matter of policy, even if the low threshold were true, it will be of little comfort to the landlords or county courts up and down the country. Taking forfeiture as an example: imagine if in every forfeiture action a landlord would have to explain and evidence both its process of decision-making and the outcome to show that it was rational. Possession lists are already overcrowded and, in reality, unworkable. Any hint of an arguable case and adjournment or directions will ensue. That problem could only be exacerbated by the wholesale incorporation of Braganza to contractual remedies. Most, if not all, summary forfeiture hearings would result in delay: a landlord could only evidence the decision-making process in a witness statement and a tenant would be free to demand that it have the opportunity to challenge the same in cross-examination. Such a wholesale adoption would prove unworkable and, ultimately, unreasonable. 
Contesting Braganza
The trend in many property cases appears to be that Braganza is not even argued; it is conceded as applying without reference to the specific terms or context of the relevant restrictive covenant or lease. The attraction of such an approach is obvious: it reduces legal argument and, theoretically, cost. 
However, landlords would be well advised to pause and ponder whether they wish to accept such an additional layer of evidence, challenge and potentially triable factual issues without first considering the other terms of the lease and the context: can such a term’s implication truly be justified? It does not go without saying in every case. 
But even if it is too late in respect of contractual discretions (at least until the matter reaches the Supreme Court again) nonetheless landlords ought to resist strongly any suggestion that such a Braganza duty applies to their contractual remedies for a tenant’s breach: that is not a contractual discretion or power as such; it is a remedy arising on a tenant’s breach. It ought not to lie in the mouth of a tenant in breach to complain about the decision (process or outcome) to remedy that breach (whether by way of a Jervis v Harris or forfeiture); contractually (or statutorily) the tenant already gets its second bite at the cherry, which is more than sufficient protection. To impose such an additional duty in such circumstances would either be meaningless (if the threshold were so low) or, more likely, a recipe for mayhem. That way madness lies…
Kester Lees is a barrister at Falcon Chambers and Richard Robinson is a partner at Hägen Wolf Ltd
Photo: Scott Graham/unsplash