Redevelopment and quiet enjoyment

Landlords often find themselves treading a fine line when carrying out works to a property occupied by one or more tenants in the light of implied (or more often express) covenants for quiet enjoyment.  Any steps by the landlord which interfere with the tenant’s possession and enjoyment of a property may result in a breach of the covenant for quiet enjoyment.

In Lechouritis v Goldmile Properties the court considered the interaction of an express obligation upon the landlord to carry out repairs to a property and a covenant for quiet enjoyment.  The landlord in that case carried out works which caused the tenant difficulty in its business. The tenant claimed (and the court agreed) that the landlord’s actions put it in breach of the covenant for quiet enjoyment.

In the recent case of Timothy Taylor Limited v Mayfair House Corporation, a landlord’s covenant for quiet enjoyment was considered again, this time in the context of an express right reserved in the lease for the landlord to rebuild the property of which the claimant’s premises formed part.  The lease stated that the landlord could carry out alterations or rebuilding works to the building even if the premises or their use and enjoyment were materially affected.

The landlord started some major building works in 2013 to rebuild the interior of the building from the first floor upwards.  The tenant of the ground floor and basement (a high class art gallery) claimed that the landlord hadn’t taken sufficient steps to minimise disturbance as a result of the work.

The court held that the landlord’s right to carry out works as stated in the lease should be construed as meaning that the landlord would take all reasonable steps to minimise disturbance to the tenant. In this instance, where the premises were let as a high class art gallery at a substantial rent (in excess of £500,000 per annum) the landlord needed to have particular regard, so far as possible (not as far as was reasonable) to the tenant’s need to keep the gallery running with as little disturbance as possible.

The court held the tenant was entitled to damages for breach of the landlord’s covenant for quiet enjoyment.  The tenant hadn’t suffered any loss of profits and the court assessed damages at 20{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of the rent payable under the lease (intended to represent the loss of use and enjoyment of the premises by the tenant).  Going forward, instead of granting an injunction (requiring the landlord to carry out works in a particular way) the court held a better option would be to reduce the rent payable from the judgement to the date of completion of the works, by 20{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48}.

This case makes interesting reading both for tenants who are or may be inconvenienced by works being carried out by their landlords and for owners of properties who propose to redevelop whilst tenants remain in occupation.

The judgement makes it clear there are a number of practical steps which landlords should take (irrespective of where they have an express reservation or right within the lease entitling them to carry out works).  These steps include the following:

1. Giving a tenant as much information as possible about any proposed works before the lease is entered into.
2. Consulting with the tenant as to how disruption might be minimised.
3. Where possible, erecting scaffolding so as to minimise the impact of the works on the tenant.

Landlords need to bear these points in mind and also that the standard of reasonableness and the steps they need to take to minimise inconvenience to tenants, particularly where the works have been carried out for the benefit of the landlord or other tenants, will be greater where higher rental value properties are involved.

If you wish to discuss any of the issues raised in this blog please contact me.