Landlord’s Covenant For Quiet Enjoyment

In the commercial property dispute case of Jafari v Tareem Ltd, a tenant (Dr Jafari) sought damages from his landlord (Tareem Ltd) who he claimed breached the peaceful enjoyment covenant in his commercial lease due to his landlord’s building works.

Jafari v Tareem Ltd

Case background

Dr Jafari ran a dental practice and was a tenant under a 20 lease on an office within a building.

The landlord of the building decided to undertake substantial works to it, which meant that it would be encased in scaffolding. The landlord was converting the building, in which the tenant’s dental practice was located, into a 134 bedroom hotel.

The scaffolding around the building was in place for a year and half, which obstructed access to the tenant’s premises. The landlord waived rent whilst the building works were being carried out. Some damage was caused to the tenant’s premises whilst the scaffolding was in place.

After the building works had finished and the rental waiver was no longer in place, the tenant withheld his rent due to the negative effect that the building works had on his business. The landlord brought legal action with regards to this.

However, the tenant counterclaimed for damages in excess of £450,000 which related to lost profits, alleging breach of the landlord’s covenant of quiet enjoyment and of nuisance. This was due to the fact that the scaffolding had obstructed the access to the dental practical which meant that the tenant’s clients assumed he was closed and consequently appointments were being missed or cancelled.

Court proceedings

The Judge found that the landlord had taken all reasonable steps to minimise any disturbance to the tenant, so there was no breach of covenant for quiet enjoyment. The Judge also rejected the tenant’s loss of profit claim.

Damages were awarded for the cost of remedial works that had been caused by the landlord’s building conversion, together with damages in respect of nuisance for loss of amenity while the premises remained damaged. This was calculated at 15% of the annual rent, and amounted to £77,984.

However, this amount was wiped out due to the fact that the Judge awarded the landlord damages totalling almost £80,000 regarding unpaid rent and service charges. The tenant also had to pay 80% of the total costs of the legal proceedings.

Appeal

The tenant appealed the Court’s ruling, arguing that the rental waiver whilst the building works were being undertaken was irrelevant to the issue of whether the peaceful covenant stated in the lease had been breached.

The Judge held that even if there was a breach of covenant for quiet enjoyment, no further damages would have been awarded as financial compensation, given the rental waiver. As a result, the tenants’ challenge to the original proceedings was rejected, along with the other grounds stated in his appeal.

Practical points to bear in mind

• Landlords must take care planning works that may interfere with a tenant’s enjoyment of the property.
• Even where a landlord enjoys the benefit of an express reserved right to carry out the work, it has to balance the right with the need to avoid interfering with a tenant’s quiet enjoyment.
• A landlord would be expected to do everything that was reasonable to avoid disturbing the tenant’s occupation.

A reasonable landlord should plan ahead to avoid allegations of breach of covenant/limit liability under the covenant, which includes:

• Giving sufficient notice of works in advance.
• Considering the tenant’s representation as to the timing and manner of the works.
• Causing minimum disruption to the tenant.
• Ensuring that access is disrupted as little as possible.
• Taking steps to ensure customers do not gain the impression that the tenant’s business is closed.
• Offering compensation.

Any waiver of rent would be taken into account in any assessment for loss as confirmed by the case of Jafari v Tareem Ltd.