Landlord and tenant — Lease of commercial premises — Right of inspection — Former garage with underground fuel tanks — Landlord having right of entry to inspect and examine state of repair and condition of premises — Landlord wishing to drill boreholes to test for environmental contamination from tanks — Whether right of inspection extending to intrusive works for purpose of inspection
The claimant was the landlord and the defendant was the tenant under a lease of commercial premises in Edinburgh for a term of 25 years from 1993. The defendant used the premises to sell and fit car parts and to carry out MOT tests. The premises had originally been used as a garage and contained disused underground tanks that had previously been used for storing fuel.
The claimant proposed to inspect the premises in order to ascertain whether the fuel storage tanks had caused contamination. This was to involve the drilling of six boreholes, of which five were to be 6m deep and the other 30m deep, to collect samples of groundwater and gas; the work was to take up to four days. It relied upon a clause in the lease that required the defendant to “permit the landlord and its agents at all reasonable times with or without workmen… to enter upon the premises generally to inspect and examine the same, to view the state of repair and condition thereof and to take a schedule of the landlords’ fixtures and of any wants of compliance by the tenant with its obligations hereunder”.
The defendant disputed the claimant’s right to carry out the works. In proceedings brought by the claimant to establish its right, the defendant contended that carrying out the proposed works would involve the taking of possession of parts of the premises for a distinct period, amounting to an eviction of the tenant for that period contrary to the claimant’s obligations as landlord. It submitted that the words “inspect and examine” in the clause did not entitle the landlord to do more than examine the premises and see what could be seen, rather than to carry out intrusive works.
Held: Judgment for the claimant.
The power to inspect and examine conferred by the lease implied a power to undertake intrusive work for the purposes of an inspection or examination. The reference to “workmen” implied that the landlord was entitled to carry out works; there was nothing to imply that its inspection had to be limited to a superficial visual inspection. It would not be sensible to curtail the power of inspection in the way contended for by the defendant, particularly in a long lease, where the condition of the premises might materially alter over time and it might be in both parties’ interests for that condition to be properly ascertained. Further, if the claimant was concerned that an environmental problem might have arisen, it would benefit both parties if an investigation were made to ascertain the extent of the problem, provided that this could be carried out with reasonable regard to the conduct of the defendant’s business.
The following case is referred to in this report.
Chevron Petroleum (UK) Ltd v Post Office 1986 SC 291, OH
This was the hearing of a claim by the claimant, Possfund Custodian Trustee Ltd, as landlord, against the defendant, Kwik-Fit Properties Ltd, as tenant, to establish the extent of a right of inspection under a lease of commercial premises.
Gavin MacColl (instructed by Todds Murray LLP, of Edinburgh) appeared for the claimant; Jonathan Lake (instructed by Anderson Strathern LLP, of Edinburgh) represented the defendant.
Giving judgment, Lord Coulsfield said:
[1] The pursuer in this action is the present landlord and the defender is the tenant of premises known as 7-13 Falcon Road West, Edinburgh, in terms of a lease dated 29 July 1993 and 13 September 1993, entered into between the defender and Nissan UK Ltd. The pursuer obtained the right to the landlord’s interest under the lease by a disposition dated 22 August 2007 and registered on 26 October 2007. The premises were at one time a garage and contain underground storage tanks that were formerly used for the storage of fuel. That use, however, came to an end at or before the grant of the lease, and since the grant of the lease the defender has used the premises as a centre for the sale, supply and fitting of tyres, exhausts and similar products and the carrying out of MOT testing. The period of the lease is 25 years from 25 May 1993.
[2] The present dispute arises because the pursuer wishes to make investigations into the solum of the premises in order to ascertain whether there has been any contamination of it, either from the underground fuel tanks or from any other source. On 30 October 2007, an agent for the pursuer notified the defender that it intended to carry out an inspection and examination of the premises for these purposes. There followed correspondence between the agent for the pursuer and the agent for the defender in the course of which the pursuer supplied to the defender a method statement explaining the purpose of the investigation and the nature of the works proposed. The purpose was stated as follows:
The purpose of undertaking investigation at the site is to assess the significance of any potential environmental liability associated with any soil and groundwater contamination present below the site.
[3] The statement proceeded to explain that steps would be taken to identify the exact location of the storage tanks and of any services that would require to be avoided in carrying out the investigation works, and continued:
Following the service avoidance exercise, it is anticipated that five shallow boreholes and a single deep rotary borehole (potentially to a depth beyond 30m) to investigate groundwater within the Major Aquifer) will be advanced in specific areas as shown in the attached proposed exploratory hole location plan. It is considered likely that the works will take up to a total of 4 days to complete. On the basis of the current site layout and tenant operations, |page:114| Delta-Simons (a consultant acting for the pursuers) considers that drilling within the building on-site is not currently feasible.
Subsequent groundwater monitoring will be undertaken at least 48 hours following completion of all the drilling works.
[4] The statement goes on to discuss the location of the exploratory holes and explains that the drilling of the five shallow boreholes to a depth of approximately 6m beneath the site surface would be carried out to collect groundwater samples from the shallow perched groundwater likely to be present within made ground or shallow drift deposits, and to give further details of the likely location of these boreholes. It continues:
Each shallow borehole will be installed as 50mm diameter land gas and groundwater monitoring wells. Each well head will be completed with a traffic strength well cover finished flush with the site surface.
[5] The statement also gives further details of the one deep borehole, which is to be terminated at least 2m below a definite groundwater strike and will be installed as land gas and groundwater monitoring wells similar to those installed in the shallow boreholes.
[6] The defender refused permission for the works proposed. Its position is, simply, that the pursuer has no entitlement to carry out intrusive works of the kind described in the statement referred to above. The pursuer then raised this action, in which it concludes for declarator that the defender is obliged to permit the pursuer to enter upon the subjects, together with workmen, “to inspect and examine the whole premises (including the solum of the premises and the underground tanks situated therein) in order to view the state of repair and condition thereof and, in particular, to drill five shallow boreholes and a single deep rotary borehole within the premises in order to inspect and examine the condition of the solum of the premises”. The argument before me was concerned with the question of whether works of an intrusive nature are in principle permissible in terms of the lease, and there was no discussion of the precise nature and extent of the works that are proposed to be carried out or the degree of disturbance to the defender’s operations or the extent to which any such disturbance could be minimised. It is, of course, evident from the above description that the works proposed by the pursuer would be intrusive and involve quite significant operations on the premises, but the issue debated before me was whether intrusive works of that general character were permitted by the terms of the lease. The defender invited me to dismiss the action; the pursuer sought a proof before answer.
[7] The lease itself is in fairly standard form for a commercial lease. The tenant is, of course, bound to pay rent and is also bound, in terms of clause 3.6, “well and substantially to repair, maintain, renew, rebuild and reinstate whenever necessary and generally in all respects put and keep in good and substantial condition” the premises and every part thereof. Clauses 3.7 to 3.10 of the lease deal specifically with exterior and interior decoration, with the cleaning and the treatment of surfaces and with the maintenance of the premises in a tidy condition clear of all rubbish. The critical clause of the lease is clause 3.11, which requires the tenant:
To permit the landlord and its agents at all reasonable times with or without workmen on giving 48 hours’ written notice (except in emergency) to the tenant to enter upon the premises generally to inspect and examine the same, to view the state of repair and condition thereof and to take a schedule of the landlords’ fixtures and of any wants of compliance by the tenant with its obligations hereunder.
[8] Clause 3.12 requires the tenant to make good all wants of compliance with its obligations of which notice in writing is given by the landlord within a defined period, and empowers the landlord to enter onto the premises and carry out repairs if the tenant fails to comply with a repair notice, but subject to the proviso that the landlord must exercise the rights conferred by the clause in a fair and reasonable manner, causing the least practicable disturbance and making good any damage. The remainder of clause 3 deals with other restrictions and obligations upon the tenant, none of which is relevant to the issue in this case. Reference was also made in the debate to Part III of the schedule to the lease, which sets out certain exceptions and reservations in favour of the landlord, including, in para 2, a right to enter onto the premises, on notice, for the purpose of carrying out repairs to adjoining premises belonging to the landlord, but subject to the requirement that the least practicable disturbance should be caused and damage should be made good.
[9] There was no dispute between the parties as to the general legal principles applicable. Reference was made to Rankine on Leases (3rd ed) at p213, where the author states:
The general rule is that, possession once taken, the landlord shall do nothing, and, so far as in him lies, allow nothing to be done to oust the tenant from the subject let or any material part of it during the lease. And the leading, though not the only, remedy is action on the warrandice expressed or implied in the lease.
[10] Reference was also made to p217, where the author states:
Eviction may be either partial or total.
The remedy in the case of partial eviction is an action of damages, which usually takes the form of a demand for reduction of rent, when the eviction is of a permanent kind. But in circumstances which involve practically a suspension or dissolution of relation of landlord and tenant, there is the more thorough-going remedy of throwing up or reducing the lease.
[11] Reference was also made to Paton & Cameron on Landlord and Tenant and to Chevron Petroleum (UK) Ltd v Post Office 1986 SC 291, where it is pointed out that the landlord’s obligation is not to do anything active to disturb the tenant’s possession.
[12] The submission for the defender was that the works proposed by the landlord would involve taking possession of an area or areas of the site for a distinct period and would amount to the eviction of the tenant for that period, and thus involve a breach of the landlord’s substantial obligation. It was submitted that clause 3.11 of the lease did not entitle the landlord to carry out works of this kind. The clause permitted the landlord to “enter on” but not to remain on the premises, and to carry out a general inspection, rather than to inspect the condition of the premises generally. What was envisaged by clause 3.11 was an inspection of the premises that would enable the landlord or its representatives to view the state of repair and condition and to take, for example, a schedule of the landlord’s fixtures, which are specifically referred to in the following clause. The words “inspect and examine” in the clause must have a meaning distinct from the words “view the state of repair”, but, in any event, these words could not be taken to entitle the landlord to do more than to examine the premises and see what could be seen, rather than to carry out intrusive works. The reference to “workmen” in the clause could merely mean that the landlord would be entitled to have such a person to view the state of the walls or roof. If it had been intended that the landlord should be entitled to carry out intrusive work, some clause with regard to the reasonableness of the work and the payment for damage caused to the tenant, along the lines of the provisions in clause 3.12 and para 2 of part III to the schedule, would certainly have been included in the lease.
[13] For the pursuer, it was submitted that the pursuer’s object was to ascertain the state of the ground conditions in the premises, which was within what was permitted by clause 3.11. In giving notice, the pursuer had made clear what its objective was and it accepted, and had endeavoured to make it clear in correspondence, that the works would be required to be carried out in the least burdensome possible manner for the tenant. It was pointed out that the premises, as defined in clause 1.2.5 of the lease, include the entire solum of the area let and it was submitted that the fact that workmen were referred to in clause 3.11 indicated that the defender’s construction, that only a superficial visual examination or something similar was permitted, could not be sustained.
[14] The arguments advanced in this debate raise a sharp and limited issue. The question is whether the power to inspect and examine implies a power to carry out intrusive work for the purposes of an inspection or examination. In my view, the reference to “workmen” demonstrates, quite clearly, that the landlord is entitled to carry out work. The obvious purposes for which work might be carried out include the opening up of suspect areas of walls or floors, for example, in order to ascertain |page:115| the state or condition of the premises. Such opening up and inspection does, in my opinion, fall within the words “view the state and condition thereof”. I do not think that there is any implication that the inspection is to be limited to a superficial visual inspection. It would not, in my view, be sensible to limit the power of inspection in that way, particularly in a long lease, where the condition of the premises may materially alter over time, and it may well be in the interests of both parties that the condition should be properly ascertained. It may be correct that when the lease was entered into the parties would primarily have had in mind the carrying out of ordinary repairs that would fall upon the tenant in terms of the lease. If specific attention had been directed to works of a more intrusive character, it may well be that the parties would have considered adding specific provisions similar to those in clause 3.12 and para 2 of part III to the schedule, but I do not think that the omission of such provisions can be held to limit the application of clause 3.11 in the way suggested by the defender. In any event, if, as appears to be the case, the landlord is apprehensive that there may be an environmental problem, it seems to me that it is in the interests of both parties that investigations should be made in order to ascertain the extent of the problem, provided that that can be done with reasonable regard to the conduct of the tenant’s business. In my view, therefore, the defender’s submission should be rejected. The consequence is, as the parties agreed, that the order to be made should be an order for a proof before answer.
[15] That is sufficient to dispose of the narrow issue argued in the debate. There may well be a question as to whether there is some limitation on the extent of the intrusive investigation that the landlord can carry out under clause 3.11, but no arguments were directed to that question. It is, however, perhaps worth adding that both parties, as I understood the position, accept that the decision of this narrow issue has no bearing on any question that might arise between landlord and tenant as to the consequences of any environmental damage that may have been sustained in the premises or with regard to any liabilities that might arise therefrom.
Judgment for the claimant.
