Quiet enjoyment versus the right to rebuild: the case of Timothy Taylor Ltd v Mayfair House Corporation and another

The High Court has considered whether a landlord was acting in breach of a covenant for quiet enjoyment when acting on a right in a lease to undertake rebuilding work.

The court held that, although the lease did indeed give the landlord the right to undertake the work, all reasonable steps had to be taken to minimise disturbance to the tenant. The penalty for the landlord was damages at a rate of 20% of the annual rent payable. In this case, that amounted to £106,000 per annum.

The court could take into account:

  1. any knowledge the tenant had of the rebuild work at the start of the lease;
  2. any compensation the landlord was offering; and
  3. who was to benefit from the work: the landlord or the tenants.

The upshot was a decision by the court that the landlord was acting unreasonably and in breach of his covenant for quiet enjoyment.

Under the common law, all tenants have the right to enjoy the property they have leased without disturbance, whether it is expressly written into a lease or not. Nevertheless, leases usually include an express provision which, in effect, overrides the common law obligation. In the context of leases, this provision is usually relied upon to prevent a landlord from stopping the tenant enjoying the property in question.

The facts of this case were quite specific. The tenant (Timothy Taylor, the art dealer husband of Lady Helen Taylor) ran a high class art gallery from the ground and basement floors of a five-storey building in Mayfair, London. The lease term was 20 years from January 2007, the rent was £530,000 a year, and the agreement included an express right for the landlord to alter or rebuild the building even if the premises or their use or enjoyment were materially affected; and to erect scaffolding. The quiet enjoyment covenant was to "permit the Tenant peaceably and quietly to hold and enjoy the Premises without any interruption or disturbance from or by the Landlord". The court’s decision was that the landlord's right to build entitled him to do so, provided that the landlord took all reasonable steps to minimise disturbance to the tenant.

The consequences for landlords is significant. The court in this case decided damages were payable for breach of quiet enjoyment and for derogation from grant. There had been no loss of profits, so damages were assessed at 20% of the rent payable under the lease from the date the scaffolding was erected to the judgment date. With regard to future breaches, the court said the scaffolding could remain but there would be damages in lieu, again at a rate of 20% of the rent. If the disruption escalated, a new application could be made.

For further information please contact Nitika Singh on 0208 290 7347 or email nsingh@judge-priestley.co.uk

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