There are many occasions in which a Registered Provider landlord wishes to carry out extensive works to one of its buildings. This might be to add to or redevelop a building. Or it might be to carry out repairs and maintenance. After Grenfell, a Registered Provider might be faced with the need to carry out extensive repairs, modifications and improvements. How does this wish or need to carry out such works conflict with a tenant’s right to enjoy occupation and use of premises pursuant to the landlord’s covenant for quiet enjoyment contained in the lease, and the landlord’s implied covenant not to derogate from grant?

The case of Timothy Taylor Limited v Mayfair House Corporations

This was considered by the court in the case of Timothy Taylor Limited v Mayfair House Corporations [2016]. In this case the tenant occupied an art gallery in Mayfair under a 20 year lease from January 2007 at a current rent of £530,000 per annum. The lease reserved to the landlord express rights to:

  • Alter and redevelop the building even if the premises or their use were materially affected and
  • Erect scaffolding provided this did not materially adversely affect access to and enjoyment of the premises.

In 2013, the landlord commenced substantial works to the upper parts. In order to do so, the landlord erected scaffolding around the premises. The landlord used the ‘wrap around’ type of scaffolding which enveloped the premises. It gave the impression the gallery was closed and formed part of the building site.

The tenant accepted the landlord was entitled to carry out these works. The tenant also accepted that there would be some inevitable disruption to the tenant’s use and enjoyment of the premises. But the tenant argued the manner in which the works were carried out was unreasonable.

The judge said where you have a landlord’s right to carry out extensive works to a building and a landlord’s covenant for quiet enjoyment, in the event of conflict, neither provision trumps the other. The lease provisions have to work together. The landlord can carry out the extensive works provided the landlord does so acting reasonably. Similarly, the tenant must accept there will be some interference with their use and enjoyment of the premises, during the course of such works.

In this case, the court held the tenant’s use of the premises had been substantially interfered with due to:

  • High levels of noise generated by the works on a daily basis. This caused staff absences due to illness. Staff had to wear headphones, work from home and even close the gallery.
  • The design of the wrap around scaffolding. It was accepted the landlord could have designed the scaffolding with the use of ‘towers’ at ground floor level so the gallery would still have been visible to the public. However, the landlord hadn’t even considered this.

As a consequence, the court ordered damages at 20% of the rent payable under the lease from the date the scaffolding was erected until the date of the judgement. The court also awarded damages for future breaches also at the rate of 20% of the rent payable from the date of the judgement to the date of completion of the works. The damages for future breaches were awarded in lieu of an injunction against the landlord carrying out noisy works in the future or having to redesign the scaffolding.

In the judgement, the court also considered what steps a landlord could take to minimise any disruption to a tenant in these circumstances and thereby lessen the risk of any claim from a tenant.

Why are the works being carried out?

A factor the court will take into account is whether the landlord is carrying out these extensive works in pursuance of a landlord covenant contained in the lease (for example, a covenant to repair the building) or are the works for the personal benefit of the landlord (for example, the addition of floors for letting or sale)? The court will have regard to this when considering the reasonableness of the landlord. The court will impose a higher standard of reasonableness where a landlord is carrying out extensive works for its own benefit.

Collaboration with the tenants

The landlord should keep any tenants fully informed as to:

  • true extent of the works
  • likely duration of the works
  • noise levels likely to be experienced
  • how noise levels can be mitigated
  • progress of the works, and when significantly troublesome works (by reason of noise dust or vibration) will be carried out.

Carrying out the works

In actually carrying out the works, the landlord should:

  • meet with tenants or their representatives and agree, so far as possible, how noisy or nuisance works can be carried out with minimum interference
  • make sure any specific requirements the landlord has agreed with the tenant are passed onto any contractor
  • appoint a reputable contractor and preferably one who is a member of the Considerate Contractor Scheme
  • erect scaffolding in a way which does not make access difficult of hazardous, or obstructs access to premises (or the signage in the case of commercial premises). To remove scaffolding at the earliest opportunity
  • stagger some works – in this case, the contractor operated two hours on-two hours off when carrying out noisy works and those which caused vibrations throughout the building
  • impose delivery and unloading arrangements that cause minimum inconvenience to the tenants and are not undertaken at unsociable hours
  • strictly comply with any rights reserved in leases which entitle the landlord to carry out such works

Tenant incentives

The landlord might wish to consider:

  • reducing rents of those tenants affected by the works during the carrying out of the works
  • offering reasonable alternative accommodation where either the works will be extensive and or prolonged, or where the tenant is vulnerable or has special needs.

A landlord is not obliged to do this, but it will demonstrate the landlord has tried to carry out the extensive works reasonably.

Conclusion

Extensive works to a building can be essential to a Registered Provider either to comply with lease/statutory obligations, or to make the best use of an asset. Such works are possible. However, this case is a timely reminder for all landlords exercising rights to carry out extensive works that may impact on tenants within the building that they run the risk of claims for damages and – in appropriate cases – an injunction if they do so in a way that unreasonably interferes with their tenants’ rights of occupation.