A landlord with "full right and liberty...to rebuild the building...and to erect any new buildings" may be forgiven for thinking that it had flexibility to do as it pleased. This is the reservation which the landlord in Timothy Taylor v Mayfair benefitted from.
On the other hand, tenants have the right to quietly enjoy their property without interference by their landlord. In this case there was an express obligation on the landlord to allow quiet enjoyment in the lease but, even if there hadn't been, it is well established that a landlord cannot "take away with one hand what it has given with the other".
In determining whether the tenant was entitled to damages in this case, the judge summarised the current state of the law:
A landlord should take all reasonable steps to minimise disturbance to the tenant when exercising its right to build;
It is relevant what knowledge or notice the tenant had of the intended works at commencement of the lease; and
An offer of compensation to the tenant is a factor when assessing the landlord's reasonableness.
Interference with tenant's rights
This tenant complained in particular about a scaffolding system which engulfed its ground floor and basement property, and excessive noise caused by the works being done to the floors above. Employees were reportedly forced to wear headphones and became ill and the art gallery occasionally had to close due to excessive noise.
In reaching the conclusion that the landlord had acted unreasonably, the judge took particular note of the following:
The property was in a premier location at a high rent;
The scaffolding blocked the tenant's access and made the art gallery appear to be part of a building site;
Inadequate information was given about the duration of the works and expected levels of noise; and
The landlord refused to offer any compensation, even though a full rack rent was being charged.
The judge refused to grant an injunction dictating the future terms of the works but awarded the tenant damages of 20% rent for the period until completion, in addition to reimbursing the tenant for 20% rent paid since the scaffolding was put up.
The landlord was also warned that it did not have carte blanche to finish the works in any way it saw fit. The judge invited the tenant to come back to the court if the disturbance increased and the landlord's contractors did not adhere to sensible work policies.
This decision is the latest in a line of judgments since 2001, which demonstrate that landlords would be well advised to take their tenants' operations into consideration when planning future developments. Landlords should be transparent with tenants about the scope of works and take practical steps to minimise the disruption, giving clear instructions to contractors. The offer of a rent discount during the development period is likely to make it harder for the tenant to accuse the landlord of being unreasonable.
There is an important distinction between such cases as this where a property is being redeveloped and those where the landlord is simply performing its repairing obligations. In the latter, landlords are less likely to be found to have acted unreasonably.