Lawbite: the cost of being unreasonable

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate dispute resolution

16-05-2016

Timothy Taylor Ltd v Mayfair House Corporation & Anr [2016] EWHR 1075 (Ch)

 A landlord was ordered to pay damages, but escaped an injunction, for breaching a quiet enjoyment covenant and the implied covenant not to derogate from grant. 

 The tenant, Timothy Taylor Limited, held a 20 year lease of the ground and basement floor premises in a five story building in the heart of Mayfair, from which it ran an art gallery.  The landlord, Mayfair House Corporation, retained the remaining floors.

 In 2013 the landlord engaged in substantial development works to its part of the building which involved the erection of wrap around scaffolding and generated high levels of noise for extended periods of time. The tenant argued this severely affected its business and breached the lease.

 The Judge recognised the conflict between the landlord’s reserved rights to erect scaffolding and alter or rebuild the building and its covenants of quiet enjoyment and non-derogation from grant.  He had to therefore decide whether the landlord acted reasonably in carrying out its reserved rights and found that it had not.  Damages were awarded by way of a 20% rental discount backdated to the date the breach (rent at trial was £530,000 p/a) first started.

 The Judge decided, however, that an injunction requiring the removal of scaffolding would be impractical and disproportionate and that monitoring noise levels would be unworkable.  As such he awarded damages in lieu of an injunction in a sum equivalent to 20% of the rent payable up to completion of the works.

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Key points

• A fact specific case offering some practical guidance to landlords on how to avoid being found in breach of covenant:

a) liaise with tenants;
b) provide advance information on the works and weekly work schedules;
c) attempt to agree a method statement which minimises disruption;
d) take into account the nature of the tenant’s use of the premises.

• A reminder also that the tenant does not need to demonstrate loss of profit to succeed, in this instance profits may have, in fact, increased during the period of breach.
• Had the landlord’s works been carried out pursuant to a repairing obligation in the lease the Judge may have reached a different view.  He mentioned that in those circumstances an express obligation to carry out the works in question was relevant when deciding on reasonableness and the steps necessary to minimise disturbance.