UK: What Are A Tenant’s Remedies Where Landlord Works Adversely Affect Its Business?

Q: I am the tenant of a bar and restaurant on the top floor of a multi storey building in central London. My lease has 5 years left to run and is on market terms. I have built up a successful business with a significant reputation over a period of 5 years; one of the selling points for my customers is the view from the premises.

My landlord intends to carry out works to the structure of the building and to install scaffolding covered with sheeting which will entirely obscure the view from the windows. The works will last 6 months and will have a significantly detrimental impact on my business. Can I stop them from doing this?

A: If the landlord's works are necessary and the proposed manner of carrying them out is the safest and most practical way of carrying them out, you are unlikely to be able to prevent the landlord from proceeding. You may be entitled to damages for any losses to your business as a consequence of the works.

Explanation

Most modern commercial leases will contain a covenant for the landlord to give the tenant quiet enjoyment, which is a right to the undisturbed use and enjoyment of the premises, as well as an implied covenant not to derogate from grant. Where the landlord is also obliged to carry out works of repair, there can be a tension between these obligations.

If the landlord's works are required to comply with its obligations to repair the building it will be necessary to undertake a balancing exercise in order to weigh the landlord's covenants and its obligations to repair the structure of the building. "..the two covenants must be construed and applied so far as possible so as to coexist on a basis of parity, not of priority.." Goldmile Properties Ltd v Lechouritis [2003] EWHC Civ 49.

Consequently the reasons for the work and the steps the landlord has taken to consider alternative methods of carrying out the works which reduce the adverse impact on your business will be relevant.

These issues were considered by Nugee J in determining an application by the tenant for an interim injunction restraining the landlord from proceeding with works in similar circumstances in Century Projects Limited v Almacantar (Centre Point) Limited [2014] EWHC 394 (Ch).

In that case, the façade of the building required cleaning and repair and it was common ground that the works were necessary.

The dispute related to the method of carrying out the works with the tenant contending that the landlord should undertake the works by a different method (using a cradle) which would not have such a significant adverse effect on the tenant's business.

The court concluded that although the tenant had an arguable case, it faced significant difficulties and the balancing exercise required before granting an injunction resulted in the rejection of the tenant's application. Prima facie it was for the landlord to decide what works were done, when, how and by whom and it was not for the tenant to dictate these matters.

However, the court also considered that where there is a tenant in occupation for a particular purpose "the landlord's duty and right to do repairs does not give him carte blanche to carry them out in whatever way he likes regardless of the impact on the tenant's business".

The landlord had considered six possible methods of carrying out the works (including the use of a cradle) and concluded that the use of scaffolding covered with sheeting was the safest (both from the perspective of the public and the occupants of the building and of the contractors) and the most practical, given the location of the building on a busy road near the crossroads of Oxford Street, New Oxford Street and Tottenham Court Road.

The court decided that the landlord had thoroughly investigated the alternative method of working for which the tenant contended, and had concluded with the benefit of professional advice that it was not a suitable alternative to scaffolding.

The judge considered that the landlord had acted reasonably and that the tenant would have an uphill struggle in establishing that by proceeding as intended, the landlord would be in breach of its covenant for quiet enjoyment.

The fact that, in considering the position, the landlord had not taken account of the damage to the tenant's business was not relevant where the alternative methods of carrying out the works were not practical.

The judge also considered that any losses sustained by the tenant during the carrying out of the works could be compensated in damages by the landlord, but that the tenant would not be able to afford to adequately compensate the landlord for the losses sustained in delaying the works.

Consequently, you need to investigate the reasons for the works, what alternatives the landlord has already considered, and whether there are other alternatives which will have less impact on your business. You will also need to show that you are good for any losses the landlord might suffer if an interim injunction is granted.

If the landlord is undertaking the works for reasons which do not relate to its repairing obligations under the lease, you may have a greater prospect of arguing that such works would be a breach of the covenant for quiet enjoyment, and that the landlord should consider alternative methods of carrying out the works which would have less of an adverse impact on your business Goldmile supra.

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.