Enforcing a DMC covenant not to keep animals in flats

Where the Deed of Mutual Covenant gives incorporated owners a discretion it must be exercised reasonably. Where the consent of incorporated owners is needed, it cannot be unreasonably withheld. The incorporated owners are not, however, a public law body and the court’s task is not to supervise their decisions and the exercise of their powers as if they were a public law body whose decisions were subject to judicial review. Rather, they operate in a contractual framework.

In Lee Yin Hong v Serenade Cove (IO) ([2011] HKEC 1309, CA) the Deed of Mutual Covenant prohibited the keeping of animals in flats unless the manager had given its permission. Various flat owners in the development kept dogs. Solicitors acting for the incorporated owners wrote warning letters to them. Some of the affected owners applied for permission to keep a dog in their flat but this was refused. The Court of Appeal held that the incorporated owners, as a matter of contractual interpretation, were subject to an implied duty to exercise their discretion reasonably and not to withhold their consent unreasonably. On the facts of this case, they had acted reasonably: the concerns of the incorporated owners (and of the residents of the estate) about the noise and mess caused by the dogs were well-known. These concerns had been communicated to the dog-owners. There was, after all, a prohibition on keeping pets in the Deed of Mutual Covenant. The incorporated owners were not a public law body whose decisions were amenable to judicial review.