Landlord and tenant – Covenant for quiet enjoyment – Derogation from grant – Claimant tenant seeking damages, injunctions and declaratory relief against defendant landlords for alleged breach of covenant – Whether defendants acting unreasonably in exercise of right to build – Claim allowed in part
The claimant was the lessee of ground and basement floor premises at 14 to 15 Carlos Place, Mayfair in London. The claimant occupied the premises for the purpose of carrying on business as a high class modern art gallery under a lease for a term of 20 years from 29 January 2007. The building of which the premises formed part consisted of five storeys comprising apartments from the first floor upwards. The defendants were the landlords.
The defendants were engaged in substantial works of development to virtually rebuild the interior of the building from the first floor upwards and create a number of new apartments which they intended to let. The claimant complained that those works had been substantially interfering with its use and enjoyment of the premises as an art gallery, particularly by reason of the noise generated by the works and the wrapping of the whole building by scaffolding.
The claimant recognised that the defendants were entitled to carry out their works and accepted that some disruption to its use and enjoyment of its premises was inevitable, but it complained that the manner in which the work had been carried out, and was threatened to be continued to be carried out in the future, was unreasonable in that it paid no or scant regard to its rights under the lease. Accordingly, the claimant brought proceedings seeking damages for breaches of its rights which had occurred in the past and declaratory and injunctive relief to regulate how the works should be carried out in the future.
The defendants contended that they had at all times carried out their works reasonably with due and proper regard to the rights of the claimant under the lease.
Held: The claim was allowed in part.
(1) In a case like the present, the landlord’s reservation of right to build in a way which, but for that reservation, would constitute either a breach of the covenant for quiet enjoyment, or a breach of the implied covenant not to derogate from the grant, should be construed as entitling the landlord to do the work contemplated by the reservation provided that it took all reasonable steps to minimise the disturbance to the tenant caused thereby. In considering what could reasonably be carried out, it was relevant what knowledge or notice the tenant had of the works intended to be carried out by the landlord at the commencement of the lease. An offer by the landlord of financial compensation to the tenant to compensate the tenant for disturbance caused by the works was a factor which the court was entitled to take into account in considering the overall reasonableness of the steps which the landlord had taken. The fact that the landlord was exercising its reserved right to do works entirely for its own purposes and where the carrying out of those works, whilst profiting the landlord, conferred little or no benefit on the tenant, was a factor which the court was entitled to take into account when viewing the reasonableness of what the landlord was doing: Southwark London Borough Council v Tanner [2001] AC 1, Petra Investments Ltd v Jeffrey Rogers plc (2001) 81 P & CR 21, Platt v London Underground Ltd [2001] 2 EGLR 121, Lechouritis v Goldmile Properties Ltd [2003] EWCA Civ 49; [2003] EGLR 60 and Century Projects Ltd v Almacantur (Centre Point) Ltd [2014] EWHC 394 (Ch) considered.
(2) On the evidence in the present case, the defendants had been acting unreasonably in the exercise of their right to build and were therefore in breach of their covenant for quiet enjoyment. The fact that the premises had been let for use as a high class art gallery for a high rent required the defendants’ right to be exercised with a particular regard, so far as that was reasonably possible, to the need of the claimant to keep the gallery running and with as little disturbance to it and its customers and staff as possible. Although the right to build was expressed in wide and untrammelled terms, it had to be exercised reasonably if the carrying out of the works was not to be a breach of the rights of the claimant under the lease, which included the benefit of an unqualified covenant for quiet enjoyment. A landlord was not obliged to offer a tenant any form of discount for the works but an offer by a landlord of a discount to the tenant could affect the overall reasonableness of the landlord’s works. Similarly, a point blank refusal, as here, of the landlord to offer any form of discount from what was otherwise a very full rent for the premises raised the bar as to what reasonableness required. Rights reserved to a landlord under the terms of a lease were to be construed narrowly against the landlord. The words “right of entry to inspect” in the present lease did not extend to coming onto the premises and occupying them for the purpose of carrying out building works on adjoining property belonging to the landlord: William Hill (Southern) Ltd v Cabras [1987] 1 EGLR 37 applied.
(3) The defendants had been in breach of the claimant’s covenant for quiet enjoyment and its implied covenant not to derogate from its grant since the commencement of the works when the scaffolding was put up, i.e. the middle of August 2014. The court could only award damages in that regard.
The best way to assess the damages was to assess what it could be regarded the claimant had lost in terms of its use and enjoyment of the premises. That could be assessed by reference to what could be regarded as a reasonable rebate in the rent which it was contractually bound to pay for premises which had been rendered by the breaches of covenant materially less fit for its occupation.
As regards future breaches, it would not be appropriate or sensible to grant an injunction in the terms sought as that would be impracticable and probably unworkable. It was inherently difficult to set a precise limit as to what constituted “noisy” and “not so noisy” works. Furthermore, the requirement to use reasonable endeavours was so vague that it might well lead to further satellite litigation. The better course was to award damages in lieu of injunctions at the same rate as for the past breaches, assessed on the basis of 20% pf the rent for the premises form the date of judgment until the work was completed.
Jonathan Seitler QC (instructed by Berwin Leighton Paisner LLP) appeared for the claimant; Katherine Holland QC (instructed by Nicholas & Co) appeared for the defendants.
Eileen O’Grady, barrister
Click here to read transcript: Timothy Taylor Ltd v Mayfair House Corporation and Another
