It is a well-established principle that building works carried out by a landlord pursuant to its covenant to repair must be balanced with a tenant's right to quiet enjoyment, it is therefore not surprising that the High Court recently found in Timothy Taylor Ltd v Mayfair House Corporation & Another  EWHC 1075 (Ch) that this principle extends to development works carried out around an existing tenant. What is more surprising is that the Court ordered a 20% rent reduction by way of damages after finding that the landlord had acted unreasonably in exercising its right to carry out development works.
In 2007, the tenant was granted a 20 year lease of the basement and ground floor premises in a five storey in Mayfair at a rent of over GBP 500,000, from which it operated a high class art gallery. Under the terms of the lease, the landlord had an express right to carry out development works to the building and erect scaffolding for that purpose.
In 2013, the landlord started works to rebuild the building from the first floor up. Prior to the commencement of the work, the landlord had discussed with the tenant the proposed design for the scaffolding to be erected. This showed that the scaffolding would be constructed with towers at ground floor level so that it would not be intrusive and the gallery could still be seen from the street. In fact the landlord used a totally different design with the scaffolding enwrapping the gallery into the building rendering it practically invisible and looking as though it was closed. The hoist to take up material was placed virtually right outside the gallery's door. In addition to this the tenant complained about the high level of noise, arguing that it disrupted its business.
The tenant claimed that the landlord was in breach of its covenant for quiet enjoyment and sought damages for past breaches and injunctions in relation to future works.
The court found that the issue was not whether the works amounted to an actionable nuisance but whether the landlord had acted reasonably in exercising its right to build. When considering this the Court had regard to the following factors:
- Whether there were reasonable steps that the landlord could have taken to minimise the disturbance to the tenant: the Court found that the landlord overlooked the tenant's interests when it came to the scaffolding design but also on the issue of noise by not discussing with the tenant means of mitigating the impact of noise on the use of the gallery;
- Whether the landlord had engaged with the tenant about the proposed works: the Court found that this should include carefully explaining to the tenant the proposed works, including any plans known at the commencement of the lease, and giving the tenant a real indication as to the duration of the works;
- The nature of the premises: the fact that the claim related to a high class gallery where the tenant paid a very substantial rent meant that the landlord should have had particular regard to minimising disturbance;
- Whether the landlord had offered the tenant any compensation for the disturbance: the landlord's point blank refusal in this respect was found to raise the bar of reasonableness;
- Whether the works are carried out pursuant to the landlord's repairing obligation or for the landlord's sole profit, as was the case here.
Having found that the landlord had acted unreasonably and was therefore in breach of the tenant's right to quiet enjoyment, the Court found that an injunction was disproportionate and that instead the tenant should be awarded a 20% rent discount for the whole period of the works, even though the tenant had not suffered any loss of profit as a result of the works.
This case is a useful reminder of the importance for a landlord to engage with their tenants at an early stage when planning works (whether for repair or development) around existing tenants and throughout the duration of those works. This includes liaising with them regarding scaffolding options and the timetabling of noisy works insofar as possible giving tenants the opportunity to raise any concerns. This proactive approach will not only reduce the risk of any dispute but also the tenants being awarded damages or an injunction, in particular if the landlord has offered compensation for any disturbance caused by its works.
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