New case on damages paid to Tenant for Landlord’s breach of covenant

Those of you who attended our property seminar on 11 May 2016 heard about the circumstances in which a Tenant can recover damages from their Landlord where their Landlord has breached terms of the Lease.

The day after our seminar a new case Timothy Taylor Limited –v- Mayfair House Corporation and another was published and this gives further insight into how the Courts will compensate a Tenant whose occupation has been interfered with by its Landlord’s activities.

In the Timothy Taylor case the Tenant ran a high class art gallery from the basement and ground floor of premises in Carlos Place, Mayfair.  The Lease commenced in 2007 and, from 2013 onwards, the Landlord started very substantial works which, essentially¸ involved the complete rebuilding of the interior from the first-floor upwards to create a number of new apartments above the art gallery.  This generated ongoing building noise and at the same time the whole building was surrounded with scaffolding.

Unsurprisingly the Tenant complained about the serious interference with the use of its premises as an art gallery.  In the Lease the Landlord had reserved the right to erect scaffolding and to rebuild the building but the Lease also contained an obligation on the Landlord to give the Tenant quiet enjoyment.  The Judge found that the Landlord had exercised its rights unreasonably and in a way that substantially interfered with the use and enjoyment of the premises as an art gallery so that the Landlord had breached its obligation to provide quiet enjoyment.

The Tenant claimed damages based on loss of profits for the period of the works.  The Court refused to award damages for loss of profits and instead compensated the Tenant by allowing a rent rebate of 20% from the date the scaffolding was erected up to the date of trial.  The Tenant also asked for an injunction to have the scaffolding taken down and noise restricted to a certain decibel level from the date of the trial.  However the Court refused to allow this since it took the view that it would be impractical.  Instead it awarded future compensation by way of a continuing 20% rent reduction up to the date of completion of the works.

This is a timely reminder for all Landlords exercising rights to carry out work that may impact on Tenants within the building that they run the risk of claims for damages and – in appropriate cases – an injunction if they do so in a way that unreasonably interferes with their Tenants’ rights of occupation.  One of the factors that marked out the Timothy Taylor case was a failure by the Landlord to consult in advance.