Equitable set-off and the covenant for quiet enjoyment

A tenant has an equitable right of set-off where there is a close connection between the landlord’s claim to rent and the tenant’s claim against the landlord. There could be such a link where the landlord is in breach of the covenant for quiet enjoyment.

In Ridge Ltd v Golden Castle Ltd ([2005] HKEC 1611, CA) T was the tenant of premises on the fifth floor of L’s building. L brought proceedings against T to recover rent arrears. T sought to resist summary judgment on the basis that it had an equitable right of set-off. T claimed that L was in breach of the covenant for quiet enjoyment since it had substantially interfered with the access to T’s premises during renovation work. The Court of Appeal was prepared to accept both that there might be an arguable claim for breach of the covenant for quiet enjoyment and (it seems) that it was in principle possible to set off such a claim against a landlord’s claim for rent arrears. The Court of Appeal nevertheless concluded that there was no sufficiently close connection between the two claims on the facts of this particular case.

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