How much redevelopment and refurbishment work can a landlord do when it has a tenant in occupation? The recent case of Timothy Taylor Limited v Mayfair House Corporation provides a useful reminder of the obligations owed by landlords to tenants where they want to carry out redevelopment works to a building around a tenant of part who remains in occupation.
Landlords with tenants in occupation must:
- comply with any express lease terms;
- act reasonably when exercising their right to build and
- take steps to minimise the amount of disturbance.
In this case:
- the works have been carried on since 2013;
- the tenant’s premises are a high class art gallery in the ground and basement;
- the works include rebuilding the upper floors and to do this work the building has been wrapped in scaffolding that made it appear that the gallery was not trading;
- the lease reserved rights for the landlord to do works; and
- the tenant knew the landlord planned works but not the full extent of them and their disruption.
There were two main complaints and the court found that the landlord was in breach.
Here the issue was whether the landlord acted reasonably by taking all reasonable steps to minimise the amount of disturbance and it was not a question of whether high or legal nuisance levels of noise were created by the works. On the facts, the judge found the landlord had acted unreasonably in not consulting with the tenant to create an agreed pattern of quiet times and times for noisy works. It was also unreasonable for the landlord not to have given any indication of the duration of the works. It was not until very close to the court hearing that any attempt was made by the landlord to set limited hours for noisy work.
The court found that the way the scaffolding was designed and erected paid no or little regard to the tenant’s interests and was therefore entirely unreasonable. The scaffolding could have been erected in a more sympathetic way, without enwrapping the gallery entirely. The wrapping gave the impression that the gallery has disappeared, whereas an alternative method of scaffolding would have preserved the external appearance of the gallery. The tenant simply wasn’t consulted.
The court awarded a 20% rebate from its rent during the works, both before and after judgment. Interestingly, this was despite evidence to show that the tenant had not suffered any loss in profits during the works. Part of the picture of the landlord’s unreasonable approach was the fact that the landlord had not made any offer to discount rent during the works. Whilst it is not obliged to do so, such an offer can affect the overall reasonableness of the landlord’s works. The court took the view that the landlord’s refusal “raises the bar as to what reasonableness requires”.
However the court fell short of granting the tenant an injunction to modify the landlord’s working practices, as injunctions have to be policed by the courts and the judge thought this was not practical in this case. The cost of requiring the landlord to re-assemble the scaffolding was also found to be disproportionately costly. The judge did say that the tenant could return to court if guidelines about the noisy works are not adhered to.
What landlords can see from this is that it is still acceptable to carry out works with tenants in situ but that they must deal with tenants reasonably. It won’t be essential to agree every course of action with the tenant but reasonable steps must to taken to mitigate disturbance to the tenant’s business and communicating regularly with tenants is key.