An increasing number of cases have come before the courts recently where tenants have sought to argue a breach of the covenant for quiet enjoyment and/or a derogation from grant to frustrate development by their landlords. In these cases the court is tasked with finding the correct balance between the landlord’s right to develop his own property and the tenant’s rights.
This case fell in to this category with the tenant also running an alternative argument based on an inventive interpretation of a right to build contained in the lease. Ultimately, the tenant was unsuccessful on both accounts.
The landlord sought a declaration from the court that it was entitled to build a new flat (for which it had already obtained planning permission) on the roof space of a block of 8 flats in Battersea. The tenant of the top floor flat sought to prevent the development on a number of grounds, but primarily on the basis of a loss of sunlight to the North-East facing private terrace which was included within their demise.
The salient arguments were that (a) a right to build in the lease prevented any development of the building and (b) the development of the flat would adversely impact the enjoyment of sunlight to the terrace to such an extent that the landlord would be derogating from its grant and/or breaching the covenant for quiet enjoyment.
It was common ground that the roof was within the landlord’s retained parts.
A reservation which implied a covenant against developing the building?
A reservation in the lease gave the right to the landlord, at any time and without the tenant’s consent, to:
build or rebuild or alter … any buildings or erections on the Development (other than the Building) … in such manner as the Landlord may think fit notwithstanding that such buildings built rebuilt or altered may obstruct any light windows or other openings in or on the Demised Premises
The Building formed part of the Development, but the Development encompassed a wider area, so the two did not have the same boundaries. The tenant argued that the underlined words made a deliberate distinction between Building and Development such that it meant that no work whatsoever was permitted to the Building.
The court held that the clause extended the landlord’s right to develop rather than restricted it. Express words would have been required to oust the landlord’s right to redevelop the retained parts.
This case affirms the principle that, in the absence of a prohibition to the contrary, a landlord is entitled to use its retained property as it wishes, even if the use would prejudice the tenant’s interests. The landlord did not need the reservation to carry out works to its retained property; it already had that right as a matter of general law.
A breach of quiet enjoyment of the roof terrace?
The parties agreed that the test to be applied in determining whether there had been a breach of the covenant for quiet enjoyment or a derogation from grant (the judge cited authority that these amount to much the same thing) was whether, as a result of the landlord’s actions:
the land demised was rendered unfit or materially less fit for the purpose originally granted
So two points arose:
- what were the circumstances surrounding the original grant?; and
- have the premises become unfit or materially less fit for purpose?
The court found that there was no evidence (especially given the right to build) that the parties had never contemplated, at the time of the grant, that the landlord might carry out an additional development which might impact upon the roof terrace. The court also found that the flat was not materially less fit for use because:
- the terrace did not constitute the main living area;
- the terrace served a number of other purposes (for socialising, pot plants or drying laundry) and its primary purpose was not to enjoy sunshine. This was particularly so given its North-East outlook;
- there was no evidence of a diminution in value as a result of the loss of sunlight; and
- the loss of sunlight was modest and in reality limited to a reduction of a couple of hours a day in the summer months.
The judge also clarified that for a breach of the quiet enjoyment covenant to occur it was irrelevant whether the tenant had an express right in relation to the matter complained of; a landlord could be in breach if, for instance, it:
- created undue noise as a result of redeveloping (despite a lease not containing such a prohibition); or
- chose to envelop the flat and block the windows (despite there being no such thing as a right to a view). It was a matter of fact and degree.
The balancing act between a landlord’s right to redevelop and a tenant’s right to quiet enjoyment and/or non derogation from grant is a difficult one, and the direction that the scales will tip is often difficult to predict. More often than not it is a matter of fact and degree and in this particular case the decision may well have been different if the loss of sunlight had been to a South facing terrace, where the primary purpose had been for the enjoyment of sunlight. However, this case shows that a well drafted right to build in favour of the landlord can add weight to a landlord’s argument and help to tip the balance in the landlord’s favour. We understand that the case is being appealed to the Court of Appeal.
Francia Properties Limited v Aristou (Central London County Court) unreported