At one time or another, a landlord is likely to want to carry out works to its property. Structural repairs might be necessary. The landlord may want to carry out energy efficiency improvements or improve core facilities to attract higher rents from prospective tenants. Where works will impact on the daily business of occupational tenants, a well-advised landlord will take into account the legal and reputational constraints that can determine a successful and harmonious programme of works. Ben Willis advises.
Where the landlord has retained the structure of a building, an occupational lease will ordinarily reserve to the landlord a right to carry out works to the structure or exterior of the property. A right to redevelop adjoining property belonging to the landlord is also standard. Whatever the reason for the works, and regardless of how broad the landlord's right to redevelop or carry out works, the landlord must ensure that it does not unreasonably interfere with the tenant's right to possess the premises without disturbance (the right to quiet enjoyment), The courts have made clear that, so far as the interplay between a landlord's right to carry out works and the tenant's right to quiet enjoyment, "neither provision trumps the other...they have to be made to fit together"1.
This is the case even if the landlord is carrying out works it is obliged to do under an occupational lease (for example repairs to the structure). Where this is the case, that will be "a relevant factor for the Court to take into account in viewing the reasonableness of the landlord's works"2, but the landlord still cannot ride roughshod over the tenant's right to quiet enjoyment of the premises.
What does this mean for landlords?
It means that if the landlord has a right to carry out works or a right to redevelop, it must exercise that right having taken "all reasonable steps to minimise the disturbance to the tenant"3 . If the landlord fails to do so, then the landlord could face a claim for breach of the tenant's right to quiet enjoyment. This could result in a damages award against the landlord or even an injunction preventing the landlord from carrying out works.
Unfortunately, there is no hard-and-fast rule as to what "all reasonable steps" means. What is reasonable in the circumstances of a specific case "has to be decided on a case by case basis"4. That said, there are a number of simple steps that landlords should consider in all cases.
Know your tenants
When considering whether a landlord has acted reasonably a court will look at the mitigating measures that a landlord has put in place to limit disturbance to tenants. Before commencing its works, a landlord should consider its tenants' businesses and what measures they could reasonably expect:
High-class letting: In the 2016 case of Timothy Taylor5, the court found that the landlord had failed to take all reasonable steps. The court took into account that the premises were let as a high class art gallery in the centre of Mayfair for a high rent. This meant that the landlord's right to build needed to be exercised with particular regard to what could be done to keep noise and disturbance to customers and staff to a minimum. Where a landlord is dealing with a prime property let to a high-end outfit, it should pay particular attention to what steps it can take to mitigate against noise or other nuisance that its tenant may suffer as a result of the works.
Retailers: A retailer's main priority will be to ensure that its trade is not affected by any works. Access to and visibility of the property will be key considerations. If the landlord is considering scaffolding or obstructing the property in some way, mitigating measures could include: i) ensuring that any proposed scaffolding will not conceal the entrance to the tenant's premises; and ii) providing additional signage for the tenant. In Timothy Taylor, the court took into account the fact that "the scaffolding could have been erected on the basis of pillars and towers" which would have "preserved to a much larger extent the external appearance of the Gallery".
Office occupiers: Noise is likely to be of significant concern to office occupiers. Restricting noisy works to out of office hours and weekends will mitigate disruption but will increase costs for landlords and may cause issues with residential neighbours. A balance will need to be struck.
Engage with tenants
Engaging with tenants at an early stage, before commencing works, can pay dividends. In most cases, the landlord should at the very least:
- provide the tenant with plans of the proposed works;
- make sure that the tenant is aware of the likely duration of the works;
- and warn the tenant of what noisy works are likely to be undertaken and when.
Early engagement allows tenants an opportunity to raise any particular concerns that they have. This provides the landlord with an opportunity to pre-empt any potential dispute, perhaps by implementing any additional, reasonable mitigating measures that the tenant has requested. It is also important to continue to engage regularly with the tenants throughout the course of the works. Plans change, and the best way to deal with this, and to keep tenants on-side, is to keep them up-to-date with any changes to the programme of works. Ensure that tenants have contact details for someone on site who can address complaints quickly if they arise.
Offer of financial compensation?
Recent case law suggests that making an offer of financial compensation to a tenant "is a factor which the court is entitled to take into account in considering the overall reasonableness of the steps which the landlord has taken"6.
However, a landlord will want to think carefully before making any offer of compensation as there are risks. A tenant may see an offer as a starting position in any negotiations for a rent reduction. Further, tenants talk, and offering a reduction to one may well result in other tenants demanding the same.
What if tenants still object to the works? Regardless of the steps a landlord takes or any mitigating measures it implements, there will be tenants who still object. However, where the landlord can demonstrate that it has taken all reasonable steps to minimise disturbance then the courts should not interfere with its right to carry out works, even if that will result in disturbance to the tenant.