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27th May 2016

Peter Robinson article re Timothy Taylor Ltd v Mayfair House Corpn published by The Law Society

Peter Robinson article re Timothy Taylor Ltd v Mayfair House Corpn published by The Law Society

Spotlight: Timothy Taylor Ltd v Mayfair House Corpn [2016] EWHC 1075 (Ch)

This case illustrates how a landlord’s right to redevelop a property around incumbent tenants ought to be balanced against tenants’ right to quiet enjoyment of their premises. Peter Robinson, partner at Hunters (incorporating May, May & Merrimans), explains what guidance the judgment offers to a landlord when exercising a right to build.

What’s happened?

In Timothy Taylor Ltd v Mayfair House Corpn [2016] EWHC 1075 (Ch), the tenant of a lease of a high-class art gallery in parts of a larger building in Mayfair, London, claimed that works being undertaken by its landlord in redeveloping the first to the fifth floors of the building as high-class flats were in breach of the tenant’s rights under the lease. The tenant claimed damages for that breach and injunctive relief to prevent future breaches.

The aspects of the works that the tenant claimed caused the breaches were as follows.

1) The erection of scaffolding and hoardings thereon, the effect of which was to ‘entomb’ the building as a whole and to make the demised premises appear to be part of the building site.

2) Significant levels of noise on a regular and repeated basis, causing severe difficulties for the tenant’s employees.

The deputy judge, Alan Steinfield QC, decided that the landlord was exercising unreasonably their rights in the lease to build, and in a way that substantially interfered with the use and enjoyment of the premises as an art gallery. Consequently, the landlord was in breach of both the express covenant in the lease as to quiet enjoyment and the implied covenant not to derogate from grant.

The deputy judge also decided that the landlord had not made any meaningful attempt to liaise with the tenant or to inform them as to the duration of the works, the likely noise effects or mitigation of the noise.

The deputy judge awarded the tenant:

  • damages in respect of the past breaches assessed at 20 per cent of the rent payable under the lease; and
  • in lieu of the injunction claimed, damages assessed on the same basis until the works were completed, based on the landlord completing the works on a less disruptive basis, with the tenant being given leave to apply for a reassessment if the landlord failed to do so.

Why is it important?

The decision examined the relationship between a covenant for quiet enjoyment in a lease and any right a landlord may reserve out of a lease to build or redevelop. The previous decisions on this relationship (Southwark Borough Council v Tanner [2001] 1 AC 1, Lechouritis v Goldmile Properties Ltd [2003] EWCA Civ 49, Century Projects Ltd v Almacantar (Centre Point) Ltd [2014] EWHC 394 (Ch) and Platts v London Underground Ltd [2001] 2 EGLR 121) had established the following.

1) A reserved right for a landlord to build should be construed as entitling a landlord to do the work contemplated, subject to the landlord taking all reasonable steps to minimise the disturbance to the tenant caused thereby.

2) Any knowledge or notice the tenant had of the works intended to be carried out by the landlord at the commencement of the lease is relevant.

3) Compensation by a landlord for disturbance caused by the works is a factor which the court is entitled to take into account in considering the overall reasonableness of the steps taken by the landlord.

The deputy judge added that a landlord carrying out works in the exercise of a reserved right which profited the landlord, but conferred little or no benefit on the tenant, was a factor that the court was entitled to take into account when viewing the reasonableness of what the landlord was doing.

How does this fit into existing law and practice?

The previous decisions in Lechouritis and Century Projects were concerned essentially with works the landlord was carrying out pursuant to a repairing obligation in existing leases, rather than for profit. As the deputy judge pointed out in his decision, the court can take into account the carrying out of works primarily for the profit of the landlord in determining whether or not the landlord is acting reasonably in doing the works.

It seems to be implicit from this that the exercise of rights to such an end is likely to increase the measures that a landlord will have to take to show that they are acting reasonably.

In what ways does this affect practitioners?
As the district judge pointed out several times in his judgment, Timothy Taylor Ltd was the tenant of a high-end art gallery located in a highly fashionable part of London under a lease at a substantial rent. Use, location and rent may well have some relevance in establishing what reasonable steps a landlord should take in exercising a right to build.

However, it is apparent from the decision that the following apply.

1) If such works are known about at the time of the grant of a lease, full disclosure of the proposals should be made to a prospective tenant.

2) Consultation with a tenant on the duration, effect and mitigation of the effect of the works in advance of the works starting is crucial in avoiding disputes.

3) If mitigation measures are agreed with the tenant, then those measures should be adhered to and implemented.

4) Inevitably, there are going to be cases where, commercially, compensating the tenant for the inconvenience caused by the works will make sense. In such cases, it is vital that the consent of the tenant to the carrying out of the works in return for the payment of the compensation is documented.

What, if anything, should I be doing differently as a result?

Practitioners are unlikely currently to spend a great deal of time negotiating the wording of covenants for quiet enjoyment and reservation of rights to build in leases that are unlikely to change following the decision in Timothy Taylor.

However, those advising landlords in exercising rights to build should encourage their client to engage fully with affected tenants in planning the works. The extent of that engagement, and whether financial compensation should be offered, will probably still depend on the extent of the planned works, but this decision does highlight the basic steps that any landlord is expected to take in order to be seen to be exercising a right to build reasonably.

This article was originally published in The Law Society – Property Section and can be found here.

Peter Robinson

Hunters incorporating May, May & Merrimans