In the recent case of Timothy Taylor Ltd v Mayfair House Corporation, the High Court confirmed that despite express provisions in the Lease permitting the Landlord to develop regardless of impact on the tenant’s right to quiet enjoyment, the landlord’s exercise of this right to redevelop was unreasonable and constituted a breach of the covenant for quiet enjoyment.
The principles arising out of the Court’s decision should be considered by any landlord thinking of developing property which is currently let.
Most leases will contain an express covenant for quiet enjoyment which states that the landlord cannot disturb or interrupt the tenant’s use and enjoyment of the property. Even if there are no express covenants to this effect in the lease, the covenant will be implied and therefore assumed to be part of the lease terms.
Right to develop/build
Most leases, including the lease in this case, reserve rights for the landlord to develop its property or build on land retained by it, despite any interference with the tenants use and enjoyment of the property. Despite these express provisions (which sometimes do include conditions), there are still risks to the landlord in exercising this right to build/develop.
The tenant occupied premises in Mayfair in London for use as an art gallery and was paying over £500,000 in rent per annum. The Lease contained an express covenant for quiet enjoyment and reserved rights for the landlord to develop the building, regardless of the effect on the tenant’s use and enjoyment of the property.
In 2013 the landlord began works to develop the upper floors of the building that the tenant occupied in part. The works were substantial works and required scaffolding. As a result of the works a lot of noise was produced during the course of the works.
The tenant was under the impression that there would be minimal scaffolding which would not materially impact the view of the gallery however the scaffolding that was used substantially obscured the view of the property. The noise pollution was substantial and led to the tenant claiming damages for breach of the covenant for quiet enjoyment. The Tenant also sought an injunction for the removal of the scaffolding and restrictions on the noise pollution.
Decision and remedies
The Court confirmed that the test to be applied was whether or not the landlord had exercised its right to develop unreasonably, which in this case the Court decided that it had.
The Court stated that it would be relevant in each case to consider the following factors in cases such as this:
- who benefits from the works, the tenants or the landlord alone;
- the value of rent and use of the property; and
- whether the rent had been discounted to account for any future disturbance by the works.
In respect of past breaches after considering the facts, the Court awarded the tenant a 20% discount in rent. The 20% discount in rent was also given until the works had been completed, subject to the landlord not increasing the level of disturbance, granting the tenant quiet periods of time when specific events were on and also adhering to a two hours on two hours off policy in relation to noisy works. On the application for an injunction, the Court decided that it would be impractical to grant an injunction for the scaffolding and noise in this case and decided that damages were sufficient.
Factors to consider when developing
As the test is whether or not the landlord had acted unreasonably, the Court referred to various principles established from previous case law which highlight practical points a landlord should consider:
- take all reasonable steps to minimise any disturbance to the tenant;
- inform the tenant of any development plans at the start of the lease and keep the tenant informed and updated on the progress, level of noise to be expected etc.;
- design any scaffolding required protecting the appearance and access to the tenant’s premises;
- agree how best to minimise disturbance with the tenant and ensure contractors/managers are aware of what has been agreed;
- have regular meetings to discuss any concerns; and
- consider offering compensation to the tenant.
For further information or advice regarding landlords rights to develop or any other commercial property matters, please contact Amie Kavanagh