The Creative Foundation v Dreamland Leisure Limited and others  EWHC 2556 (Ch) focuses on a graffito attributed to the illusive Banksy which appeared on the side of a building during an art event hosted by Folkestone art charity – The Creative Foundation. The artwork quickly became a local phenomenon, but this was not to last. The building was leased to the Dreamland Leisure Ltd who saw it as a potential windfall. They removed the section of the wall on which the artwork was painted, repaired the wall and shipped the artwork to the US for viewing and valuation. The graffito was valued at approximately £470,000. The Creative Foundation, believing that artwork should be returned to Folkestone, took an assignment of the landlord's title to the mural and brought a claim against Dreamland for its return. While on the face of it, the case dealt with ownership of the painting, it actually considers fundamental aspects of landlord and tenant law.
The repair covenants
The defendants argued that they were obliged (or at the very least) entitled, to remove the mural in order to comply with the tenant's covenants in the lease: namely the obligations to keep the premises and fixtures in good and substantial condition and to make good all external rendering. It was submitted by Dreamland that the removal of the graffito was necessary, firstly in order to return the property to a state of good and substantial condition, and secondly to deter future graffiti, believing that the wall would become a 'shrine to Banksy'.
The High Court considered this argument and agreed that the repair covenant did oblige the tenants to maintain the property. They even agreed that the use of more extensive methods in order to comply with the repair covenant could be acceptable. However, the court made it clear that intrusive methods of repair would only be justifiable where the tenant were able to prove that the method used was an equally reasonable method on an objective test. In this instance, the High Court did not agree that Dreamland had proven this and suggested that there were far more reasonable methods to 'repair' the wall. The court also rejected the defendant's suggestion that the wall would become a 'shrine to Banksy'.
Ownership of the removed Graffito
The second level of Dreamland's defence was that once the graffito was removed from the building it became their property in line with an implied term in the lease. The High Court stated that it was necessary for a term to be implied into a lease to address what happened to parts of the building replaced or removed by the tenant under the terms of a repair covenant. The usual implied term states that parts of a building which are removed become chattels. Sometimes these chattels become the property of the tenant (e.g. debris) but the starting point is always that the landlord will retain ownership of anything removed from the property, particularly where the chattels have substantial value. In this case it was clear that the artwork had a considerable potential value, and the Court found that it was therefore correct that the Graffito became the property of the landlord.
What does this mean in practice?
Clearly this is an unusual situation but it is a reminder that if you are a landlord or tenant and become aware of a valuable chattel attached to the land, you should consider who owns it when removed from the property and the potential implications of this.
The principles raised by this case have wider implications than expensive graffiti and leasehold property. On a freehold disposal with valuable chattels fixed to the land (the classic example of the loom in a mill) the parties should expressly deal with ownership in the sale contract. Consider ownership and the consequences of removal pre-completion e.g. who will make good and to what standard? Well advised parties will always carefully inspect a property both prior to lease, acquisition or disposal and during the transaction to consider what items will be considered to be fixed to the land. Who knows, you may even find a Banksy!