£100,000 is the cost of disturbing the quiet enjoyment of a landlord’s tenant when it comes to building works. At least, this is what one receives in discounted rent when it comes to operating a high-class art gallery in Mayfair. In the recent case of Timothy Taylor Limited v Mayfair House Corporation, the court awarded the claimant a 20% rebate on its rent during the works, both before and after judgment. Judge Alan Steinfeld QC awarded the rent rebate having acknowledged that the sheer scale of the redevelopment works on the building where the gallery is situated went well beyond any reasonable work that a tenant would have accepted. This case highlights the reasonableness of the steps a landlord can and should take to protect the tenant’s quiet enjoyment of a premise while trying to carry out development works successfully.
The role of the lease
Timothy Taylor Limited took a 20 year lease out on the premise in 2007. Mr Taylor was made aware that some development works might be taking place through the course of the lease. The Landlord, Mayfair House Corporation CM Inc, reserved the right to do works on the building while the tenant was in occupation. Well-drafted commercial leases will contain specific rights which enable landlords to carry out building works around existing tenants but these are often balanced against the right of quiet enjoyment of the premise by the tenant in occupation.
Under Common Law all landlords are under an implied obligation to allow their tenants quiet enjoyment of the premises let to them. This implied obligation is normally reinforced in the agreed lease between landlord and tenant. Most commercial leases will reserve the right of a landlord to undertake development works while the tenant is in occupation. The key is for the landlord to engineer the development works while maintaining the tenant’s right to quiet enjoyment. Mayfair House Corporation had an express right reserved in the lease with Timothy Taylor Limited for the landlord to rebuild the property. The lease stated that the landlord could carry our alterations or rebuilding works to the building even if the premises or their use were materially affected.
Where did it go wrong?
The court held that Mayfair House Corporation had a right to carry out the works as stated in the lease but that it would take all reasonable steps to minimise disturbance to the gallery. Taken as a whole process, the course of the developments were seen by the court to extend the scope of works permitted in the lease and the conduct of the landlord was deemed to be unreasonable. As such, the court found that Mayfair House Corporation was in breach of its covenant for quiet enjoyment.
The court viewed a number of actions and omissions on the part of the landlord as unreasonable. The court found that the design of the landlord’s scaffolding and its failure to consult and provide sufficient information to Timothy Taylor Limited to plan around the noise did not fall in line with the standards set in the lease; Mayfair House Corporation did not provide a schedule of works to the gallery outlining the duration of the works or setting out hours acceptable to perform particularly noisy work. In addition, Mayfair House Corporation refused to offer any rental discount to Timothy Taylor Limited because of the disturbance resulting from the works.
Learning points for landlords
Landlords can learn that it is acceptable to carry out development works on a premise while a tenant is in occupation. While it may not be necessary to agree every course of action with the tenant, the landlord must act reasonably to mitigate the disturbance any works would have on the quiet enjoyment of its tenant. Open dialogue between the parties is key, particularly in negotiating working schedules and rent discounts, if any apply.