Leases of properties that are located on estates necessarily include rights of access over estate roads. The Court of Appeal decision in Hunte v E Bottomley & Sons Ltd [2007] EWCA Civ 1168; [2008] PLSCS 135 underlines the importance of considering the scope of the rights granted, to avoid future conflicts while leases are in force.
The landlord owned a large industrial site. One of the units on the estate was used as a café. The lease included a covenant for quiet enjoyment and included rights over the roadways, subject to observing the landlord‘s regulations regarding the direction of traffic.
Three years after the lease was granted, the landlord sold part of the industrial estate for residential development. In order to shield the land sold from the ugliness of the industrial estate, the landlord prohibited access to the café via one of the estate roadways, and erected a large wall that blocked the other estate road used to access the café. Consequently, access to the café was only possible via an inconvenient and little known accessway.
The tenant sought damages claiming: (i) that the landlord had derogated from its grant by curtailing its rights of way; and (ii) a breach of the landlord’s covenant of quiet enjoyment. The landlord resisted the claim, arguing that it had reserved the right to direct traffic in whatever way it chose.
The Court of Appeal ruled that the proviso that allowed the landlord to make regulations for the direction of traffic was limited to the way in which traffic circulated around the estate roads. There was no justification for closing the roads completely. The premises were let as a café and the tenant’s customers should have been able to access the café without obstruction by the landlord. Consequently, the landlord had derogated from its grant.
Importantly, the right to regulate the traffic was not a defence to the tenant’s claim that the landlord was in breach of its covenant for quiet enjoyment. The proviso was a limitation on the tenant’s rights of way. It did not, and could not, affect the landlord’s covenant for quiet enjoyment, when the lease was read as a whole.
The tenant argued that his lease had been rendered worthless by the landlord’s actions and the court awarded him damages for loss of profits and for the capital value of his lease. The sums involved in this case were modest. None the less, the decision serves as an important reminder that the courts will not allow landlords to derogate from their grant or to interfere with a tenant’s quiet enjoyment of premises.
One alternative for landlords planning changes that might adversely affect tenants might be to insert a landlord’s break clause in their leases and to contract the leases out of security of tenure under the Landlord and Tenant Act 1954. This might help preclude expensive claims from tenants whose businesses would suffer as a result of the changes planned.
Allyson Colby is a property law consultant
