Tenant’s Quiet Enjoyment covenant v Landlord’s right to redevelop

In the recent case of Timothy Taylor Ltd v Mayfair House Corporation and another [2016] EWHC 1075 (Ch the High Court assessed the tenant’s right for quiet enjoyment against the landlord’s express right to redevelop the building.

The facts

The tenant which operated an elegant art gallery in Mayfair paid a considerable rent of £530,000 per annum under a 20-year lease which commenced in 2007.  In 2013, the landlord began to carry out substantial redevelopment works which resulted in high noise levels for extended periods of time and the premises not being visible due to the erection of wrap around scaffolding.

Although the tenant was aware of the landlord’s right to carry out these works under the terms of the lease, it claimed that the works unreasonably restricted their use and enjoyment of the property.

The right to temporarily erect scaffolding in the lease did contained a proviso that the right “ shall not materially adversely restrict access to or the use and enjoyment of the Premises and the Landlord agrees to use all reasonable endeavours to minimise the time for which scaffolding is erected on or in connection with the Building” In addition the Landlord had under paragraph 1-7 of Part 1 of Schedule 1 to the Lease“ the right to (i) alter, raise the height of, or rebuild the Building or any other building, and (ii) to erect any new buildings of any height on any adjoining property of the Landlord in such manner as the Landlord thinks fit even if doing so may obstruct, affect, or interfere with the amenity of or access to the Premises or the passage of light and air to the Premises, and even if they materially affect the Premises or their use and enjoyment PROVIDED THAT if the Landlord increases the size of the Building then it will [as] soon as practicable vary this Lease by Deed to reduce the Tenant’s service charge percentage”

The principal issue in the case was the interrelationship between the covenant for quiet enjoyment in the Lease and the Landlord’s right to build reserved to it by paragraph 1-7 of Part 1 of Schedule 1 to the Lease.

The Decision

The High Court held that the way the landlord carried out the redevelopment works (including the erection of the scaffolding) was in breach of the quiet enjoyment covenant and the implied covenant not to derogate from grant.  The court found that the landlord had not acted reasonably in exercising its right to build even though the rights had been expressed in wide terms . One of the factors that the court is entitled to take into account when considering “reasonableness” of a landlord’s action is whether it is undertaking the wok because its building is in need of repair. In this case, the landlord was redeveloping the building to make a profit from new lettings. The tenant was awarded a 20% rent rebate backdated to the date when the breach commenced and, additionally, damages equal to 20% of the rent from the date of the judgment until the works were completed.

Lessons from the case

This decision highlights the need for landlords to minimise disturbance to tenants whilst carrying out wide-ranging works to a property. In particular, landlords ought to:

  • inform tenants of the extent and length of intended works before the lease is granted;
  • ensure that scaffolding safeguards the access and appearance of the premises;
  • frequently discuss with tenants how to minimise disturbance and keep them informed as to the details and progress of works;
  • consider offering financial compensation, e.g. rent reduction, to tenants for the period of the works;
  • consider that the standard of “reasonableness” can be higher when the works are purely for their own benefit;
  • bear in mind the nature of tenant's use of the premises; and
  • make the contractor aware of any agreements entered with tenants regarding their use and enjoyment of the premises.

Tenants entering into a new lease, on the other hand, should  consider specifying in the lease how the disturbance should be minimised, if the landlord insists to reserve a right to carry out works.