Leases will almost always contain a clause allowing the tenant “quiet enjoyment” of the premises. Usually, they will also include a term permitting the landlord to carry out building works. The recent decision of Timothy Taylor Limited v Mayfair House Corporation & Another explored the conflict between these two competing clauses.
The tenant, Timothy Taylor Limited, operated a high end art gallery from the basement and ground floor of a premises in Mayfair, London. The lease was for 20 years commencing in 2007 at an annual rent of £530,000. From 2013 onwards, the landlord started substantial building works which involved completely rebuilding the interior from the first floor upwards. Those works resulted in ongoing building noise and at the same time the entire building was surrounded with scaffolding.
Understandably, the tenant complained. It subsequently pursued court proceedings against the landlord arguing that its use and enjoyment of the premises was being substantially interfered with due to the high level of noise from the building works and the way the scaffolding and sheeting had been wrapped around the building, giving the appearance that the gallery was closed.
The lease reserved the right of the landlord to erect scaffolding and to improve the building. However, the Court found that the landlord had acted unreasonably in the exercise of that right and was in breach of the covenant to allow the tenant quiet enjoyment of the premises for the following reasons:
- The landlord had failed to accommodate the tenant’s need to keep the gallery open, particularly as it was let at a substantial rent.
- The landlord had refused to offer any form of discount for the disturbance being caused.
- The design of the scaffolding ignored the tenant’s interest and unreasonably obstructed access to the gallery.
- There was no prior consultation with the tenant about the building works, the noise levels, or how the landlord would mitigate the impact of that noise on the gallery.
The tenant claimed damages based on loss of profits for the period of the building works. However, the Court instead chose to compensate it by allowing a 20% discount on its rent in respect of past breaches. The Court did not believe it was practical to grant an injunction to have the scaffolding removed but instead decided that the tenant should continue to receive the discounted rent until the works were completed.
This case highlights that even where a landlord expressly reserves a right in the lease to carry out substantial building works, it does not mean that it can disregard the tenant’s rights. Any landlord contemplating building works should, firstly, check the lease carefully to see that it is permitted to carry out those works and, secondly, take steps to ensure that it is not breaching its obligations to its tenant.
If you are involved in any dispute concerning a lease then the Property Litigation Team at Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.