Archive for the ‘Covenants’ Category

Quiet enjoyment: landlord’s liability for the actions of other tenants

September 27, 2012

In Hilton v James Smith & Sons (Norwood) Ltd ([1979] 2 EGLR 44, CA (Eng)) L owned a row of shops with a private road (a cul de sac) giving access to the rear of the shops. T was the tenant of the end of the cul de sac. It had an easement to use the road for access and delivery but could never use it because other tenants and people making deliveries to them parked in such a way as to obstruct the road. The leases of all of the shops contained a prohibition on parking cars, obstructing the road or causing a nuisance or annoyance to the landlord or other tenants and to use the road only for delivery purposes. L was liable to T (even though the actions were not lawful under the terms of the other tenants’ leases) in nuisance and for breach of the covenants for quiet enjoyment and non-derogation from grant (Ormrod L.J. thought the label didn’t matter). L was liable because it had the means of bringing the problem to an end (an action for nuisance or breach of the express covenant just mentioned) but had done nothing.

Omission and quiet enjoyment

August 29, 2012

In Booth v Thomas ([1926] Ch. 397) a landowner’s predecessors in title had enclosed a stream in a culvert. A lease had been granted of neighbouring land and a building was constructed on it. The current owner of the stream was also the landlord of the neighbouring land on which the building stood (but the stream was not part of the lease). The landowner failed to keep the culvert in good repair. As a result, the culvert broke after a heavy storm. The result was that the foundations of the nearby building were damaged and the building partially collapsed. It was held that this was a breach of the landlord’s covenant for quiet enjoyment even though the problem was caused by an omission. Independently of the covenant for quiet enjoyment, the landlord owed a duty to keep the culvert in good repair. The failure to perform that duty was also a breach of the covenant for quiet enjoyment.

‘It appears to me that the case is one in which the defendant is liable by reason of his omission to repair and keep in good repair the culvert, in consequence of which the stream was able to get at the premises of the plaintiff, and by that failure or omission the defendant has rendered himself responsible to the plaintiff for a breach of the covenant for quiet enjoyment.’ (Pollock M.R. at 404)

Discharge of restrictive covenant against sub-letting (England)

June 21, 2012

In Re Lee’s Application ([2012] UKUT 125 (LC)) concerned a lease owned by L of a flat in a block of flats. The lease contained an absolute restriction on sub-letting. The landlord was the management company that owned the freehold of the building. The lessors’ covenants in the long leases on which the owners held their flats required the landlord to enforce the lease covenants if any tenant required it to do so. Thus, the lease covenants created a scheme for the benefit of all tenants.

L wanted to be able to sub-let and so he sought the discharge of the covenant or its modification to a qualified covenant (only to sub-let with consent). He relied on section 84(1)(aa) of the Law of Property Act 1925 (that the continued existence of the covenant would impede some reasonable use of the land for public or private purposes). The question was whether the covenant secured some practical benefit of substantial value or advantage to the landlord (section 84(1)(a) of the Law of Property Act 1925).

It was accepted that flats were likely to be better kept and would be easier to manage if there were a distinct community of owner-occupiers. This remained true even though 5 of the 31 leases in the block  had been  modified so that the restriction on sub-letting was qualified. In any event, the lease imposed a duty on the landlords to enforce the lease covenants. Thus, the covenants were part of a scheme on which the other owners had relied when buying their flats. The landlord’s duty was to uphold the scheme. This duty remained despite the modification of the restriction in five of the leases.

Did a licence to alter amount to an implied waiver?

May 21, 2012

In Faidi v Elliot Corporation ([2012] EWCA Civ 287, CA (Eng)) F and E were tenants of flats in the same block. F’s flat was below E’s flat. The leases in the block contained a covenant to lay carpet and underlay on the floors (presumably as a means of sound insulation). This covenant was made by each tenant with the landlord ‘and with and for the benefit of the Flat Owners.’ The landlord covenanted to enforce the lease covenants on request provided the tenant making the request paid the costs of the enforcement action. E’s predecessor in title got the landlord’s consent to alter the flat by installing underfloor heating and laying oak flooring. The Court of Appeal held that this amounted to a waiver of the covenant concerning carpet and underlay because it was obvious to all that there was no point in carrying out these expensive works and then laying carpet. They must have intended to waive the covenant. The Court of Appeal urged neighbours to settle their disputes through mediation rather than litigation.

Obligation to pay rent in advance; break clause; estoppel

April 19, 2012

In PCE Investors Ltd v Cancer Research UK ([2012] EWHC 884 (Ch)) C had granted a lease to P. The lease contained a break clause. One of the pre-conditions to the effective exercise of the break right was that the tenants must have paid the rent due up to the ‘Termination Date.’ Rent was payable quarterly in advance on the usual quarter days. The tenant served a notice on the landlord exercising the break right. The landlord served its demand for the rent due on the next quarter day. The demand sought the entire rent due for the next quarter even though the tenant’s notice, if effective, would bring the lease to an end before the end of the quarter. The tenant proffered rent calculated on a daily pro rata basis from the relevant quarter day to the Termination Date specified in its notice. It invited the landlord to confirm that its calculation of the rent due was correct but the landlord did not respond. The landlord then argued that the tenant’s notice exercising the break right was ineffective since only part of the rent due on the quarter date had been paid. The tenant responded that it was only liable to pay the amount due on a pro rata basis up to the date of termination. It also sought leave to amend its pleadings to include a plea that the landlord’s silence in the face of the tenant’s request for confirmation amounted to a representation that the calculation was correct and that the landlord was estopped from resiling from that representation.

Peter Smith J. made the point that each lease, and indeed each contract, has to be construed in the light of the objective intention of the parties to it and that decisions concerning similar words in other contracts, indeed even other leases, are of limited help. He concluded that there was no reason to depart from the plain words of the lease which required the full quarter’s rent to be paid in advance ([35] and [54]). He refused leave to introduce the estoppel point. In any event, he thought that there was nothing in it. The landlord had made no representation since it had received the tenant’s notice at the time it demanded the full quarter’s rent ([85]). The request for confirmation could not impose a duty on the landlord to comment ([86]). There was no evidence as to why the tenant believed it had only to pay rent on a pro rata basis; it refused to disclose the legal advice it had received ([91]). If there was a representation / belief it was as to the law rather than as to a fact ([96]). There is no ‘general proposition that where one party perceives the other side is making a mistake they have a duty to correct it.’ ([104]).

No liability in nuisance for the ordinary use of residential premises. The principle of caveat lessee.

April 12, 2012

There is no liability in nuisance for the ordinary use of residential premises. Landlords are not liable to tenants in nuisance in respect of a state of affairs that existed at the date of the lease.

In Baxter v Camden LBC (No 2) ([2001] Q.B. 1, CA (Eng)) the council had converted a house into three flats (one flat on each floor). The work had been done in accordance with the building standards of the time but these standards did not require the installation of adequate sound insulation between the floors. The tenant of the middle floor complained of the noise from the flats above and below her. These noises were occasioned by the ordinary use of the flats but the lack of sound insulation meant that they could be heard clearly and were a source of great stress to the tenant. She brought proceedings in nuisance against the council.

These failed because the noises were the result of the ordinary use of residential premises and this could not amount to a nuisance. ‘Ordinary use may only give rise to a nuisance if it is unusual or unreasonable having regard to the purpose for which the premises were constructed.’ (per Tuckey L.J. at 12). The claim also failed because the cause of the problem existed at the date of the lease. While it is normally no defence to say that the plaintiff came to the nuisance, this does not apply in the case of landlord and tenant. Here there is a principle of caveat lessee when it comes to the state of the property (per Tuckey LJ at 12 – 13). It would have been different if the inadequate conversion works had taken place after the date of the lease.

On the facts, the landlord was not liable in negligence. The work had been done properly according to the standards of the time.

Tuckey L.J. provided this general statement of the law of nuisance:

‘The essence of the tort is undue interference with the use or enjoyment of land and the right of the plaintiff not to be interfered with. In striking this balance in the case of noise nuisance, and other nuisances of this type, the court will obviously have to consider the locality, age and physical characteristics of the premises in question. Occupiers of low cost, high density housing must be expected to tolerate higher levels of noise from their neighbours than others in more substantial and spacious premises.’ (at 10).

Quiet enjoyment: Southwark LBC v Long

April 10, 2012

In Southwark LBC v Long ([2002] EWCA Civ. 403, CA (Eng)) S had granted L a lease of a flat in a block of flats. There was a communal rubbish bin. Residents could either put rubbish in the bin or into a chute leading to it from their floor. S agreed to ‘take all reasonable steps to keep the estate and common parts clean and tidy.’ In fact, the bin was often full. The area was smelly and there had been maggot infestations. The rubbish chutes were not big enough so residents had to bang them to force their rubbish down. This was noisy and was often done late at night. The English Court of Appeal found that S was in breach of its covenant. Handing over the operation of the system of refuse collection to contractors did not amount to taking all reasonable steps unless there was a proper system for monitoring the performance of the contractors. Nor was it enough simply to remind residents not to use the refuse chutes outside certain hours. This did not satisfy the requirement to take all reasonable steps. While the fact that this was low cost public housing was a relevant component of the factual matrix to be borne in mind when interpreting the covenant, there was no room for compromise on basic standards of cleanliness. The cost-effectivess of a proposed measure was relevant to an assessment of whether it was a reasonable step.

On the covenant for quiet enjoyment, this case was indistinguishable from Southwark LBC v Mills. The state of the facilities and the use of them was as originally contemplated so that there was no breach of the covenant.

Implied licence for landlord to enter property to perform repairing covenant

April 9, 2012

A tenant who uses property in a reasonable way for a reasonably contemplated use does not commit waste. A covenant to ‘keep’ property in repair implies that, if need be, it will first be put in repair. A landlord who has covenanted to keep demised premises in repair has an implied licence to enter the property for a reasonable time in order to perform the covenant.

In Saner v Bilton ((1877 – 78) L.R. 7 Ch.D. 815) L owned a newly constructed warehouse for the storage of grain. He granted a lease of it to T. L covenanted to ‘keep the main walls and main timbers of the warehouse in good repair and condition.’ T used the property in a reasonable way (L alleged that this was not so but failed to make out this allegation). Nevertheless, a beam supporting one of the floors broke. Two of the external walls bulged and very extensive repair works were needed.

Fry J. held that T had not committed waste. He had not used the property unreasonably. A tenant who uses property in a reasonable way for a reasonably contemplated use does not commit waste. The fact that the cause of the problems arose from the original construction of the building did not take the work outside the scope of the landlord’s repairing covenant. A covenant to ‘keep’ property in repair implies that, if need be, it will first be put in repair. Put another way, a covenant to ‘keep’ in repair does not water down the scope of the repairing covenant. T was not entitled to damages in respect of the time he was kept out of possession by the landlord’s presence for the purpose of the repair works. A landlord who has covenanted to keep demised premises in repair has an implied licence to enter the property for a reasonable time in order to perform the covenant. This implied licence is not inconsistent with the covenant for quiet enjoyment:

“I think the covenant for quiet enjoyment must be read as subject to the license which I have held to be implied in the covenant to repair.’ (per Fry J at 824).

Non-derogation from grant: what was the common intention of the parties?

April 6, 2012

In Lyttelton Times Ltd v Warners Ltd ([1907] A.C. 476, PC) L ran a printing-house next to W’s hotel. An architect persuaded both of them that the printing house could be rebuilt so that W could have extra rooms for the hotel on the upper floors and L could keep an engine-house and printing machinery on the ground floor. They were persuaded that noise would not be a problem. In fact, it was and W sought an injunction limiting the use of the printing-house so as to reduce disturbance to his customers. W claimed that there was a derogation from grant. The Privy Council rejected this. Each party knew that both businesses were to be carried on. The implied common intention had to be determined in the light of the uses contemplated by the parties.

Lord Loreburn L.C. said:

‘If A. lets a plot to B., he may not act so as to frustrate the purpose for which in the contemplation of both parties the land was hired. So also if B takes a plot from A, he may not act so as to frustrate the purpose for which in the contemplation of both parties the adjoining plot remaining in A’s hands was destined.’ (at 481).

Assessing damages where breach of covenant for quiet enjoyment makes it impossible to trade

April 4, 2012

Where there has been a breach of a covenant for quiet enjoyment which makes it impossible to trade from the demised premises, it is legitimate for the judge to find on the balance of probabilities that the tenant would have traded successfully and then to reach a conclusion as to the profit likely to have been earned. If this approach is taken there is no need to apply a discount to the resulting figure to take account of the possibility of failure.

In Vasiliou v Hajigeorgiou ([2010] EWCA Civ 1475, CA (Eng)) L broke the covenant for quiet enjoyment in a lease of restaurant premises on the ground floor and in the rear yard of his property. He had stored materials in the yard making trade unlawful. Then work done by his contractors resulted in foul water leaking into the restaurant from upstairs flats. T brought separate proceedings in respect of each incident. In the first case, the judge found as a fact that the tenant would have traded successfully from the premises. He then reached a conclusion as to the amount of profit that would have been earned had the landlord not been in breach. The court in the second case replicated this approach. On appeal, the landlord argued that a percentage discount should have been applied to reflect the possibility of failure. The English Court of Appeal rejected this. The judges below were entitled to take the approach they had. Once the judge had found that the tenant would have made a go of the restaurant there was no place for a discount.