In the recent case of Timothy Taylor Ltd v Mayfair House Corporation and Another, the High Court considered the relationship between an express right for a landlord to carry out works and a tenant’s right of quiet enjoyment reserved in a commercial lease. This case provides useful guidance to landlords who intend to carry out works to a property which may impact on their tenant’s use and enjoyment of the same.
All leases contain an obligation on the landlord to give its tenant quiet enjoyment of the demised premises, meaning that there should be no interference with the tenant’s possession and enjoyment of the property. This covenant is normally expressly stated in a lease but if not the court will imply this obligation. The covenant overlaps with the landlord’s implied obligation not to derogate from its grant; it cannot give with one hand and take away with the other. These implied obligations are usually relied upon by tenants to prevent a landlord from doing something that would stop them enjoying the property.
In Timothy Taylor Ltd, the tenant operated an art gallery from the ground and basement floors of a five storey building in Mayfair, London. The lease was for a term of 20 years from January 2007 at a rate of £550,000 per annum. It contained an express right for the landlord to alter or re-build the building, even if such works materially affected the use and enjoyment of the premises. In addition, the landlord was given the right to erect scaffolding temporarily as long as this did not materially adversely restrict access to, or impact on the use and enjoyment of, the premises. Conversely, the lease also contained a quiet enjoyment covenant permitting the tenant to peacefully hold and enjoy the premises without any interruption or disturbance from or by the landlord.
In 2013 the landlord started extensive works to rebuild the interior of the premises from the first floor up to create new residential apartments. The tenant accepted that the landlord was entitled to carry out these works but claimed that the manner in which the works were being carried out was unreasonable. It claimed that its use and enjoyment of the premises was being interfered with due to the high levels of noise being generated by the works on a daily basis which had impacted on the gallery’s business, resulting in staff suffering absences and on occasions the gallery having to be closed. The landlord had informed the tenant that scaffolding would have towers at ground floor level so that the gallery could still be seen to be operating and accessible. However, in reality the scaffolding erected for the works enwrapped the whole building meaning that the gallery was almost invisible. It appeared to passers-by that it had been closed down. The tenant argued that the landlord had not taken reasonable steps to minimise disturbance and was therefore in breach of its quiet enjoyment covenant. It sought damages for breaches of its rights and an injunction in respect of any future works.
It was held that the landlord was entitled to carry out the works in question provided that it had taken all reasonable steps to minimise disturbance to the tenant. On considering what reasonable steps should be carried out, the court said that the following factors should be taken into account:-
- Whether the tenant had notice of the intended works at the commencement of the lease. In this case the tenant was only aware of a general intention on the part of the landlord and had not been told about any specific works or that they would be as extensive as they in fact were.
- Any offer of financial compensation to the tenant for disturbance caused by the works. In this instance, the landlord had dismissed outright any suggestion of compensation, or even a meeting to discuss the same.
- Whether the works were being carried out for the benefit of the tenants in the building or for the landlord’s personal benefit. Here, the works were entirely for the landlord’s own purposes and would have no benefit to the tenants.
It was therefore held that the landlord had acted unreasonably in the exercise of its right to carry out the repairs and was in breach of the quiet enjoyment covenant and was also in derogation from grant. The court noted that the premises was being let as a high class gallery at a substantial rent and therefore the landlord should have considered the tenant’s needs to keep the gallery running with as little disturbance as possible. A point blank refusal to offer any form of discount to the high rent despite the works meant that an increased level of reasonableness was required. In addition, it was noted that the way in which the scaffolding had been designed and erected paid no regards to the interests of the tenant and was entirely unreasonable. There was no liaison with the tenant as to the likely duration of the works, the noise levels to be expected or how the impact of works could be mitigated.
As such, the tenant was entitled to damages for the landlord’s breach of its quiet enjoyment covenant and for derogation from grant. The tenant had not suffered any loss of profit so the court assessed the damages at 20% of the rent payable under the lease from the date the scaffolding was erected to the date of Judgment. It was deemed impractical to grant an injunction for the future works but instead the court awarded damages in lieu for future breaches, again assessed at the rate of 20% of the rent up until the date of completion of the works.
This case shows that an express right for a landlord to carry out works does not mean that it can then do what it wants. It should still have regard to the tenant’s quiet enjoyment rights and should take all reasonable precautions to minimise disturbance caused. The standard of reasonableness may be more stringent when the works are carried out for the landlord’s own benefit rather than that of its tenants. When planning to carry out substantial works a landlord should ensure that the tenant is given as much information as possible about the works, including their likely duration and the disruption that will be caused. It is good practice for the landlord to meet with the tenant before the tender stage to discuss how disturbance could be minimised so that any specific requirements can be passed on to their contractor and professional team. In addition, landlords should ensure that scaffolding is designed to minimise impact on the appearance of the tenant’s premises and access to them.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.