View from Regent Street
January 25, 2017
Read the first article in this series, 'The view from Fifth Avenue' here
The position under English law has differing aspects, (and certainly uses a different legal language) but is similar. It is true that this could be an issue which is unique to the circumstances in which these retail tenants find themselves, but it raises issues pertinent to landlords and tenants in both jurisdictions. One can easily envisage similar circumstances in London, for example, affecting footfall to tenants’ retail stores and outlets, be that at the instigation of the state, or from other sources. What if a prominent politician or other VIP took offices in Regent Street or Bond Street? What if state security demanded establishing a similar cordon for some other reason, which interfered with the tenants of prime retail space in the capital?
In English law, the concept of a tenant (as opposed to a landlord) seeking to ‘cancel’ or ‘determine’ a lease is almost unheard of without the agreement of the landlord (for example a surrender or a break clause). Whilst English contract law has well-established principles of breach of a contract leading to its termination, this does not translate well to the realm of landlord and tenant law where a tenant is seeking to terminate the lease (this is not the case with the landlord, who can usually seek to forfeit the lease in the event of a tenant’s breach).
So with this avenue all but closed to tenants, they would usually need to focus on the terms of the lease itself to seek damages, or a court order that the interference must stop.
Like our U.S. colleagues, English lawyers would express doubt as to whether the concept of rent abatement can apply to these facts. For the reasons given above, where an English lease contains a rent abatement - or ‘rent cesser’ - clause, that clause normally relates to circumstances in which the property in question is damaged or destroyed (usually due to circumstances for which the landlord is insured) only to the extent that it is uninhabitable. If that is the case, the rent will not be payable whilst the property cannot be occupied. It might be stretching matters too far (without specific wording in the lease) to extend this well-established concept to fit these facts. Trump Tower (or the hypothetical English equivalent) is not a property which is damaged; it is the access to it which has been compromised.
If this offers little comfort to tenants, there are two further (and largely overlapping) English law concepts which might assist. English law has long recognised that landlords must not ‘derogate from their grant’ and the obligation to allow the tenant ‘quiet enjoyment’ of the property. If proved, they entitle a tenant to sue the landlord for damages.
The former principle states that, in granting the lease, the landlord has agreed to confer certain benefits on a tenant, he should not do anything which substantially deprives the tenant of those benefits. The latter requires the landlord to ensure that there is no interference with the tenant’s possession and enjoyment of the property itself.
English cases on the above where tenants have succeeded, have included erecting advertising billboards obscuring the tenant’s premises, alterations by a landlord which discourage passers-by, and causing noise and disruption by way of building works adjacent to the tenant’s property.
So it would appear that English tenants might be better placed in these circumstances than their U.S. counterparts. However, as in America, tenants are likely to run into the same problem they would encounter had they set up shop on 5th Avenue instead of Regent Street: is the presence of such high security something instigated (or even sanctioned) by the landlord, or is it a matter of national security, out of the hands of whatever corporate vehicle happens to own the freehold of a given retail unit? The unfortunate truth is likely to be that the security presence is not the ‘fault’ of the landlord, and thus, the landlord cannot be said to have violated either legal principle.
Tenants may therefore find themselves, as in America, caught between a rock and a hard place: a landlord who is ‘not at fault’ and a rent abatement clause which doesn’t do enough to protect their interests. Perhaps one for English tenants’ lawyers to think about too when drafting leases of high-end retail and fashion outlets in the busiest and most desirable of the UK’s shopping districts.