Timothy Taylor Ltd v Mayfair House Corp [2016] EWHC 1075 (Ch)

Summary

This case concerned a dispute between a landlord developer and an occupier tenant, who was unhappy with the effect that the landlord’s works were having on the tenant’s business.

The lease contained a right for the landlord to carry out works of development to the building and also to erect scaffolding. However, the tenant claimed that the landlord’s actions were unreasonable and were, therefore, in breach of the landlord’s covenant to give the tenant quiet enjoyment. The Court had to balance up the interests of both the landlord and the tenant, bearing in mind the rights set out in the lease.

Having regard to the facts, the Court sided with the tenant and held that the landlord had been unreasonable in the exercise of its rights and was therefore in breach of its covenant for quiet enjoyment.

The tenant was awarded a rent reduction for the period of the works.

The facts

The building involved in this dispute was in the heart of Mayfair and opposite the Connaught Hotel. The tenant operated as a high class modern art gallery pursuant to a lease granted in 2007 for 20 years. The premises demised to the tenant constituted the basement and ground floor of the building. The rent payable varied between £510,000 and £530,000 per annum over the relevant period.

The landlord embarked on a programme of development works affecting the upper floors, the purpose of which was to build new residential apartments. The lease contained the following rights:

  1. The right to temporarily erect scaffolding for any purpose connected with the building and premises, provided it did not materially adversely restrict access to or the use and enjoyment of the premises and the landlord agreed to use all reasonable endeavours to minimise the time that the scaffolding was erected.
  2. The right to alter, raise the height of or rebuild the building or any adjoining property of the landlord.

At the same time, the landlord covenanted to permit the tenant to peaceably and quietly hold and enjoy the premises without any interruption or disturbance – this is commonly known as a covenant for quiet enjoyment. Even if it is not expressly given in a lease, it will be implied. Although the tenant accepted the landlord’s right to carry out the works, it complained on two bases:

  1. that the noise generated by the works was unreasonable and persistent; and
  2. that the type and design of the scaffolding was inappropriate in that it totally enveloped the building and also the siting of the hoist affected deliveries to the art gallery.

The Law

Until 2003, it was not clear whether a tenant could bring a claim against its landlord in circumstances where the landlord’s activities were interfering with its occupation of land. It was thought that any such claim could only be brought in nuisance. However, in the 2003 case ofLechouritis v Goldmile Properties Limited [2003] EWCA Civ 49, the Court of Appeal held that the landlord’s right to do work and the covenant for quiet enjoyment co-existed and that the proper approach was to consider whether the landlord had taken all reasonable steps to minimise the potential risks to the tenant. If that was not the case, then the landlord would be in breach.

The law was further confirmed in the case of Century Projects Limited v Almacantar (Centre Point) Limited [2014] EWHC 394. The restaurant tenant in the Centre Point Tower in London sought an injunction to stop the landlord from erecting scaffolding needed to carry out necessary repair works to the building. The Judge held that a landlord could carry out the work provided it acted reasonably in the exercise of the right. Furthermore, what is reasonable had to be decided on a case by casebasis.

In both the Lechouritis and the Century Projects cases, the landlord was under an obligation to carry out the works to the building. However, in this case, it was noted that the landlord was simply carrying out works to the remainder of the building for its own benefit and not pursuant to an obligation to the tenant.

The decision

The case was heard over nine days and involved numerous experts and factual witnesses. Having considered all of the evidence, the Court held that the landlord had acted unreasonably in the exercise of its rights and therefore was in breach of its covenant for quiet enjoyment. The court took the following factors into account when reaching its decision:

  1. the premises had been let for use as a high class art gallery in the centre of Mayfair for a high rent and, therefore, the landlord’s right to build should be exercised with that in mind;
  2. the tenant had no notice of the works when it entered into the lease;
  3. the works were being carried out solely for the benefit of the landlord;
  4. the landlord had refused to offer any discount to the rent;
  5. the original scaffolding design consisted of towers and the landlord’s decision to totally envelope the building was unreasonable in those circumstances;
  6. the positioning of the hoist close to the entrance to the gallery was also unreasonable given it restricted access to the gallery;
  7. the landlord had failed to provide advance notice of the proper nature and likely effect of the works; and
  8. although the issue of noise was not an easy one to make, the lack of communication in advance meant that the tenant could not make decisions about relocating temporarily during the course of the works or to plan its business accordingly.

Damages or an Injunction?

The Court felt that it was disproportionate to require the scaffolding to be changed or the programme of works to be altered. Instead, it ordered damages amounting to a 20% reduction in the rent for the period from when the works commenced until completion.

Our comments

Communication is very important in situations like this. Although there may be an express right to build, this does not mean that a landlord can simply proceed without consultation. A well advised landlord will also take all reasonable steps that might be necessary in order to reduce the effect that such works will have on the tenant.