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Case law: Landlords can carry out works that damage tenant’s businesses, provided they act reasonably

Landlords considering carrying out works in a way that may seriously disrupt a tenant’s business may be able to do so if they have acted reasonably, given the tenant’s concerns, the High Court has indicated.

Legal Alert

This update was published in Legal Alert - December 2014

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A tenant operated a bar and restaurant from the top floors and viewing platform at Centre Point in London. A key feature of the business was the wonderful view.

The landlord carried out a survey of the entire building and commissioned a contractor to advise how to clean and repair the building. The contractor offered six alternatives, recommending scaffolding covered by plastic sheeting as the best option. The work would take between four and six months.

As this would obstruct the view from the tenant’s restaurant it commissioned its own contractor who said the work could be carried out just as well using cradles, which would not block the view. The tenant therefore argued it would be unreasonable for the landlord to use scaffolding and sheeting. The landlord commissioned a second expert to reconsider the matter, who also recommended scaffolding and plastic sheeting.

The tenant claimed that using scaffolding and plastic sheeting would breach the landlord’s covenants to give the tenant quiet enjoyment of the property and not to derogate from the grant of the lease, because it failed to minimise the potential damage to the tenant’s business. It applied for an interim injunction to stop the landlord using scaffolding pending a full trial of its claim.

The court had to consider whether financial damages would adequately compensate the tenant if an interim injunction was not granted, but the Court at the full trial later decided the landlord was in breach of its covenants. It ruled that, for the most part, financial damages would be adequate compensation, though there was a risk of some uncompensatable disadvantage to in “the possible destruction of what is currently a flourishing enterprise”.

On the other hand, it found that if the landlord was forced to delay the works pending a full trial, this would incur losses of some £3.75m, which the tenant would be unable to compensate the landlord for if the landlord won at the full trial. There was therefore a significant risk of damage to the landlords that the tenant would be unable to compensate it for, whereas the tenant’s risk of damage was far less. For these reasons it refused the injunction.

However, the Court also considered whether there was a reasonable prospect the tenant would succeed in its argument that using scaffolding would breach the landlord’s covenants. It decided:

  • Both parties agreed cleaning and repairs were required, and the landlord had both a duty and a right to do them 
  • It would not be normal for the tenant to tell a landlord how to carry out repairs – it was up to the landlord.
  • However, landlords had to act reasonably in the options it chose, to avoid any serious impact on their tenants.
  • The tenant’s and landlord's rights must be made to fit together – neither trumped the other.
This meant the landlord could carry out works provided it acted reasonably. The court took the view that, in the circumstances, the tenant would face an ‘uphill task’ persuading the court at the full trial that a landlord following consistent advice from different experts was acting unreasonably.

Operative date

  • Now

Recommendations

  • Landlords contemplating carrying out works in a way that may seriously disrupt a tenant’s business must be able to show they have acted reasonably, given the tenant’s concerns. This may include considering multiple options, taking expert advice on the pros and cons of each and, if the circumstances warrant it, getting a second opinion. If possible, consult with the tenant, and keep comprehensive records. However, landlords can take comfort from the fact that they may still have acted reasonably - even if the tenant’s business is damaged as a result.
Case ref: Century Projects Ltd v Almacantar (Centre Point) Ltd [2014] EWHC 394


Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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