May 26, 2016

Art gallery awarded compensation for prolonged disturbance by landlord

In Timothy Taylor Ltd v Mayfair House Corp, the court has determined that the landlord had not acted reasonably in exercising its right to build and had breached the covenant for quiet enjoyment. The tenant was awarded reimbursement of £100,000 per year from the beginning of the works in August 2014 and for every year that the works continue. This reflects a 20% “refund” of the tenant’s rent.

The court made the following points:

  • The premises were let for use as a high-class art gallery in the centre of Mayfair for a high rent; that required that the right to build should be exercised with particular regard, so far as reasonably possible, to the tenant's need to keep the gallery running and with as little disturbance to it and its customers and staff as possible. The landlord failed to ensure that regard was given to the tenant and the nature of the tenant’s business and business needs.
  • The landlord had shown a sketch plan indicating how the scaffolding might be erected in a sympathetic way which preserved the open aspect of the gallery. Thereafter, instead, the buildng was "enwrapped" in scaffolding and gave the impression that the gallery had entirely disappeared.
  • The main hoist for materials to be lifted was placed outside the gallery entrance which was often blocked by delivery vehicles as a result.
  • The tenant had been experiencing high levels of noise on almost a daily basis.
  • The landlord had not consulted with the tenant on the likely length of the works, how to mitigate the noise and had not offered any discount in the rent.

Despite the case involving commercial property of a high value, this case will be relevant to all residential and commercial leases too. Perhaps the most pertinent point is that during the period of disturbance, the tenant’s profits have, in fact, increased demonstrating that the tenant does not have to show a monetary loss to obtain an award of compensation for disruptive building works.

The previous 2014 case of Century Project Limited v Almacantar also concerned the balancing act between the landlord’s right to build/obligation to repair reasonably and the tenant’s right to “quiet enjoyment” of the property.

Century Project owned an exclusive restaurant, Paramount, previously occupying one of the highest floors in the Centre Point Tower in London. In an application to stop the landlord’s external building works to the lower floors, the tenant alleged that the landlord was breaching the covenant allowing the tenant the right to quiet enjoyment of the property. The restaurant boasted a £5 million pound furnishing when it was first leased as a private members club and 360 degree views around London. However, after only four years of the restaurant being opened up to the public, the restaurant tweeted its closure in January of last year.

The closure came less than a year after the court refused the tenant’s application. Despite acceptance that the works were adversely affecting the business, the refusal was based on a real risk of damage to the landlord, i.e. if the injunction was granted and the landlord was subsequently successful at trial, the tenant would be incapable of providing compensation.

You can read our previous blog on this case where Mike Hansom discusses how, in this instance, the landlord’s right prevailed. It seems each case will be decided on its own unique circumstances taking into account the factors listed above.

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