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Striking the right balance: compensation for disturbance caused by landlord’s redevelopment works

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Summary: The High Court has provided further guidance on how a landlord’s right to redevelop around sitting tenants ought to be balanced against tenants’ right to quietly enjoy their premises. The tenant, advised by Berwin Leighton Paisner LLP, succeeded in its claim that the landlord had acted unreasonably in the manner in which it had carried out its own redevelopment works. The court awarded compensation to the tenant for the disturbance caused.

There is often tension between landlords who want to redevelop premises and tenants who will be affected by such developments.

Well-drafted commercial leases will contain specific rights which enable landlords to carryout building works around existing tenants, notwithstanding disturbance that may be caused. However, such rights will usually need to be balanced against a tenant’s right to quiet enjoyment of its premises.

Goldmile Properties Ltd v Lechouritis [2003] EWCA Civ 49 previously established that in order to strike the right balance, a landlord will need to use all reasonable precautions to minimise disturbance to tenants.

The case of Timothy Taylor Limited v Mayfair House Corporation [2016] EWHC 1075 (Ch) provides further clarity on the application of the Goldmile test.

In this case, the tenant, Timothy Taylor Limited, brought a claim against its landlord, Mayfair House Corporation, over works being carried out by the landlord immediately above the tenant’s basement and ground floor premises in Mayfair, London, which were in use as a high class art gallery.

In a judgment handed down by the High Court, Timothy Taylor succeeded in proving that, despite the landlord’s express right to redevelop adjoining premises under the terms of the gallery’s lease, the manner in which the landlord had been undertaking its redevelopment works exceeded this right and was in breach of its covenant for quiet enjoyment.

In particular, the Court found that the design of the landlord’s scaffolding and its failure to consult and provide sufficient information to enable the gallery to plan around the worst of the noise were unreasonable.

The Court further found that the landlord’s redevelopment and access rights under the lease were not wide enough to entitle the landlord to access or alter the tenant’s premises in order to undertake works to remove screed from the floor above. These works would have required the tenant to vacant the premises for a significant period of time. The judge held that such conduct would be a breach of the covenant of quiet enjoyment and a trespass on the premises. 

The Court also held that the landlord’s refusal to offer any form of rental discount during the period of disturbance raised the bar of reasonableness required of it in respect of the works. 

The Court awarded the gallery damages to compensate it for the disruption it had experienced since August 2014, and damages going forwards until the scaffolding is removed and the noisy works subside.

We successfully acted for the tenant in this case. Real Estates Disputes Partner, Joanna Lampert, said:

We are delighted to have achieved this result for our client. This decision helps to add further clarity to the manner in which landlords should balance their own development rights with their obligations to existing tenants, which we believe will be of interest and assistance to developers and occupiers alike.

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