In what is proving to be a competitive market for commercial landlords, many are looking for different options to maximise the revenue from their investments by undertaking works to all or part of a tenant occupied building. This gives Landlords the opportunity to increase their yields by exploring potential developments or conversions of their building. Landlords also have to be acutely aware of the change to energy efficiency requirements which will be implemented over the next few years and the works they may need to carry out to bring their building up to a ‘lettable standard’ or, in fact, the general repairs, decoration and maintenance to keep the building in good repair and condition under the terms of any lease. However, they must be conscious that if part of the building is tenanted the tenant remaining in situ will have an implied (or more often express) right to quietly enjoy their property.
The case of Timothy Taylor Ltd v Mayfair House Corporation and another  EWHC 1075 (Ch) considered this very point. Mr Timothy Taylor ran a high end art gallery from the ground floor and basement of a Mayfair building, let on a 20 year lease at a substantial rent of £530,000 per annum. The lease permitted the landlord to alter or rebuild the building even if the tenant’s property (or its use or enjoyment) were materially affected. The lease also reserved the right to temporarily erect scaffolding provided that this did not materially adversely restrict the use and enjoyment of or access to the tenant’s property.
The landlord carried out major works to the interior of the building in order to construct residential flats from the first floor upwards and duly erected scaffolding that covered the whole of the building and restricted access to, and the view of, the tenant’s property. The tenant argued that this, as well as the high levels of noise, meant that the landlord had failed to take reasonable steps to minimise the disturbance. The tenant sought damages for the breach of the quiet enjoyment covenant and an injunction to prevent any further works. The court found that the landlord should have taken all reasonable steps to minimise the disturbance to the tenant. The tenant was entitled to damages for the breach of covenant and derogation from grant, but an injunction was deemed impractical. As the tenant did not actually suffer any loss of profits during this period, the court awarded backdated damages of 20% of the rent payable from the date the scaffolding was erected until the date the works were completed.
This case gives rise to some interesting points to consider for both landlords and tenants. Landlords will not be prevented from carrying out works provided they give careful consideration to them and the impact on any tenants before commencing. Early discussions and negotiations will give the tenant ample opportunity to consider their position and the landlord should consider paying compensation from the outset. Communication at all times is key.
Another factor the court will likely consider is whether the works are for the benefit of the landlord or the tenant. In the above case the works most certainly benefitted the landlord and thus a higher level of consideration needed to be given to the tenant. Tenants need to be aware of these points if their landlord commences work at their property or approaches them to discuss works, allowing them to take an educated approach to negotiations.
The case serves as a reminder to landlords of the importance of the rights their tenants enjoy and the steps that need to be taken to ensure that they do not breach them.