08 September 2016 #Real Estate
It is commonplace for a landlord who fully owns a commercial property to part rent it out and then to reserve a right in the lease enabling them to develop the remainder of the property. However, would the landlord be completely free to do so?
This question was answered in Timothy Taylor Ltd v Mayfair House Corporation  EWHC 1075 which reminded landlords to be cautious not to categorically assume an unchallengeable right to develop the remainder of a building without taking into account the concerns of existing tenants.
The tenant operated a high class art gallery from the ground floor and basement of a five storey building in Mayfair, London. The lease contained clauses entitling the landlord to carry out development works to other parts of the building, and in particular to erect scaffolding. Against this, the lease also contained a clause permitting the tenant to peaceably and quietly enjoy the premises.
When the landlord began works to develop the upper floors of the building in 2013, the works produced high levels of noise and the scaffolding enveloped the whole building. This rendered the gallery virtually invisible, giving the impression that it was closed and formed part of the building site. This soon led to a claim from the tenant against the landlord.
There was an acute conflict between the landlord’s and the tenant’s respective rights under the lease. The Court found that despite the landlord’s express right to redevelop adjoining premises under the terms of the lease, with some disruption, the manner in which the landlord had been undertaking its redevelopment works exceeded this right and was in breach of the covenant for quiet enjoyment.
In particular, the Court found that the design of the landlord’s scaffolding and its failure to consult or provide sufficient information to enable to gallery to plan around the noise were unreasonable.
The judge took particular note of the quality of the premises and their location and the high rent payable and the fact that the landlord was undertaking the works for its own benefit rather than simply seeking to comply with any repairing obligation or other duty to the tenant.
This decision highlights some practical points and factors that a landlord should consider when taking reasonable steps to minimise disturbance to a tenant. A landlord should:
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