|Focus:||The law of nuisance in the context of leasing|
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The law of nuisance is concerned with balancing the conflicting interests of adjoining owners. In this article, we examine the law of nuisance in the specific context of leasing and consider its impact on the landlord-tenant relationship.
Nuisance caused by the landlord
It is difficult to envisage circumstances in which a tenant might be liable for nuisance caused by a landlord to third parties.
However, it is not uncommon for a tenant to have a claim against a landlord for loss suffered by the tenant itself, arising from the acts of the landlord. This is most likely to occur in connection with a breach of the tenant's right to 'quiet enjoyment'. The covenant for quiet enjoyment is an issue we have covered in previous alerts, most recently in February 2015.
A good example of a tenant's success in bringing this type of claim against a landlord is the case of Lagouvardis v Brett and Janet Cottee Pty Limited  ANZ ConvR 590. There, the tenant's permitted use of the leased premises was for computerised signwriting and automotive windscreen and domestic window tinting. The tenant complained that dust was entering the premises from a car park owned by the landlord, situated immediately behind the tenant's workshop. The dust interfered with the fixing of the window tint film which resulted in considerable rectification costs. The tenant subsequently vacated the premises and the landlord claimed for unpaid rent and outgoings. In response, the tenant cross-claimed seeking damages for nuisance or for breach of the covenant for quiet enjoyment.
The Court held that the tenant was entitled to terminate the lease for repudiation by the landlord and to recover damages, with no liability for rent for the remainder of the lease term after termination. In reaching this conclusion, the Court made the following noteworthy findings:
- the landlord not only knew that the tenant was conducting a very sensitive business on the premises, but also knew that the tenant had complained about the problem
- the landlord had promised to seal the car park but had failed to do so
- the landlord had promised to sweep the car park regularly but had failed to do so
- a serious amount of dust was entering the premises from the car park (the car park being under the control of the landlord) which was causing great detriment to the tenant's business, and
- the dust penetration was a nuisance.
Nuisance caused by the tenant
Landlords will usually include in their leases an obligation on the tenant not to do anything in or around the premises which may be a nuisance to other occupiers in the building or adjoining properties. Where a tenant does cause such a nuisance, the landlord may give an appropriate notice to the tenant setting out details of the default and requiring the tenant to remedy it. If the tenant fails to comply with the notice, the landlord will have the usual remedies available to it under the lease.
However, as landlords generally do not want to get caught up in disputes between tenants, they will often include further provisions in their leases to state that they are not obliged to actually enforce these rights on behalf of one tenant against another.
There can also be situations where a landlord may be tempted to maximise its rental income by leasing premises for a use that is permitted under the relevant land use zoning and planning approvals, but could be annoying to adjoining property owners. The question that arises in this situation is who can be held liable for a resulting nuisance committed by the tenant – the landlord, the tenant, or both?
This issue came before the United Kingdom Supreme Court in 2014 in Lawrence v Fen Tigers Limited  2 WLR 433;  3 WLR 555 (the Fen Tigers Case).
In accordance with relevant planning permissions, a stadium was constructed for various motor sports, including speedway racing and stock car racing. Subsequently, an adjoining motocross track was added. The planning permissions did not place any conditions on the level of noise. Some years later, the complainants bought a house near the stadium and complained about the noise that came from it. Noise abatement notices were issued under Environmental Protection legislation and some works were carried out as a result, but the complainants alleged that the noise was still unacceptable. They brought proceedings against several parties including the landowners, the tenant and the organiser of the events.
The Court held that it was no defence to the nuisance claim that the complainants had acquired the affected property after the nuisance had started. (It might have been a defence if the complaint had arisen because of a post-acquisition change in the use of the affected property by the complainants, but this was not the case here). Further, it was held that a planning authority could not by the grant of planning permission authorise the commission of a nuisance.
The relevant question was what a normal person would think was a reasonable level of noise to have to put up with, given the established pattern of uses, or character, of the locality. While the implementation of a planning permission could be relevant to evaluating the established pattern of uses, it could not be relied upon as making the noise constituting the nuisance 'part of the character' of the locality. In other words, the planning permission was not the major determinant of liability, even where the grant related to a major, strategic development.
Ultimately, the Court held that the activities causing the noise constituted a nuisance. After weighing up all the competing factors in the exercise of its discretion, the Court awarded damages and injunctive relief against both the tenant and the operators of the mortorsport stadium and motocross track.
Subsequently, there was a further hearing to determine whether the landlords could be held additionally liable for damages for the nuisance committed by the tenant. There, the Court reasoned that a landlord would not be liable for nuisance caused by the tenant unless the landlord could be said to have authorised the nuisance, or otherwise had participated directly in the commission of it. If a landlord had been aware of the nuisance but had taken no steps to prevent it, this on its own would not be enough to make the landlord liable. Further, the mere letting of the property would not amount to authorisation unless there was a very high probability that this would result in nuisance.
As a result, the Court went on to find that in this case, the landlords were not liable in nuisance. The majority concluded that the permitted use could have been carried on without causing a nuisance, and the fact that the landlords had canvassed for the continued use of the stadium for motor sports did not amount to participation in the nuisance.
However, it is clear from this case that there may be circumstances in which a landlord may find itself liable for nuisance caused by its tenant.
The Fen Tigers Case and New South Wales
The weight given to a development consent in New South Wales in cases involving nuisance would seem to be consistent with the common law as it is applied in the United Kingdom. In Hoxton Park Residents Action Group Inc v Liverpool City Council (No 2)  NSWCA 363, Basten JA noted at 68: "So far as the operation of the development consent is concerned, that is a matter to be pleaded by way of defence. Whether or not the grant of a development approval will provide a defence to a claim in nuisance, and if so, in what circumstances, may well depend not merely on a pleading but on the evidence".
Lesson for landlords
Landlords need to carefully consider the use which is to be permitted in the lease. Having a covenant in the lease that the tenant must not commit a nuisance may not protect the landlord where, at the time of the grant of the lease, there is a very high probability that the permitted use will result in a nuisance.
Tip for tenants
Tenants also need to carefully consider the use they intend to make of the premises having regard to the character of the locality. Even if the use is permitted under the lease and allowed under the relevant planning controls, there is no guarantee that an action may not be brought at some time in the future by an aggrieved neighbour.
A word on Statutory Authorities
In certain circumstances where the development is important enough, Parliament may be prepared to enact legislation to overrule the common law. For example, section 19A(2) of the Luna Park Site Act 1990 (NSW) provides that "[t]he emission of noise from the Luna Park site does not constitute a public or private nuisance".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.