Real Estate building blocks - quiet enjoyment

In this edition of our Building Blocks series, Kayleigh Stevenson takes a look at the landlord's covenant for quiet enjoyment in commercial leases. 

A quiet enjoyment covenant is a provision in a lease imposing an obligation on the landlord to ensure that the tenant is free to use its premises without interference or interruption by the landlord or those under the landlord's control. A covenant for quiet enjoyment is a concept unique to leases and, although a key element of every lease (whether it is express or implied), it is often misunderstood. But why is it so important and what happens when it is breached? 

Quiet enjoyment is frequently mistaken to mean that the tenant is, quite literally, entitled to a quiet property and therefore any excessive noise would constitute a breach. This is inaccurate and, although noise can be a relevant factor, a quiet enjoyment covenant has a much wider application. The tenant's right to quiet enjoyment goes hand-in-hand with the tenant's right to exclusive possession and it is fundamental to the core value of the lease to the tenant. It ensures that the tenant can peacefully use and occupy the property without unreasonable or unnecessary interference or interruption by its landlord (and in some cases, a superior landlord), or persons acting for the landlord, and it is integral to its ability to run its business without fear of intrusion.

Excessive noise at a property could, therefore, constitute a breach of the quiet enjoyment obligation if it is severe enough to materially impact on the tenant's beneficial use of the property. However, many other acts (and occasionally, omissions) by the landlord are capable of breaching the covenant. For example, a landlord entering the property without notice (where the lease requires prior notice to be given) or carrying out unauthorised works to the property is likely to be in breach of its quiet enjoyment obligation. A landlord carrying out works to its adjoining property, if the works materially impact on the tenant, could also potentially constitute a breach. 

Can the landlord still access the property?

Under most commercial leases, the landlord is permitted to access the property for specific reasons, which are typically listed within the lease itself. This is particularly important in a lease of part of a building or a unit in a wider estate, as the landlord is likely to be under an obligation to perform services and carry out works for the benefit of the other occupiers of the building or estate, in return for payment of a service charge.

The landlord's right to enter the property is usually subject to certain provisos, such as a requirement to provide prior notice, to repair any damage caused and to comply with any reasonable requirements of the tenant. Landlords also often carve out the ability to develop other areas of the building or estate, even if such works interfere with the tenant's use and enjoyment of the property. However, the extent to which a landlord can rely on such wording will depend on the nature of the works and other circumstances at the time.

A landlord must ensure that it reserves all the rights it will need over the property during the term, including rights of way, to avoid an inadvertent breach of the quiet enjoyment covenant by purporting to exercise rights it does not have. However, it is equally important for a tenant to understand the rights the landlord is reserving over the property and to be satisfied that they can still operate their business from the property if the landlord does indeed exercise those rights.

What actions are not “quiet”?

The application of a quiet enjoyment covenant can be vast and far reaching. There is no prescribed list of acts which would breach a quiet enjoyment covenant; whether a landlord's conduct breaches the covenant very much depends on the circumstances at the time and the actual impact on the tenant. 

It is usually only acts by the landlord or a person under the landlord’s control that will constitute a breach of the quiet enjoyment covenant. This could extend to acts by a tenant of an adjoining unit in the same building or estate, but it would not cover acts by an occupier of neighbouring property where the landlord in question does not own that property nor have any control over it. However, where there is a superior lease, the landlord can be held responsible for the actions of a superior landlord if the covenant is expressed to extend to 'title paramount'. A well-advised landlord will resist this. 

There is considerable overlap between the landlord's quiet enjoyment covenant, the covenant not to derogate from grant (which is essentially a rule that a landlord cannot give with one hand and take away with the other) and the rights reserved to the landlord under the lease. Further discussion of this is beyond the scope of this article, but it is worth noting that where a landlord is in breach of its quiet enjoyment covenant, it is very possible that there has also been a derogation from grant and/or excessive use of reserved rights.

Remedies

Early professional advice should always be sought where a property dispute arises between a landlord and a tenant. With that said, a sensible first course of action for a tenant alleging a breach of the quiet enjoyment covenant will be to raise it with the landlord and seek an amicable solution. The courts have been very quick to criticise landlords and tenants who bring actions against one another without first making any meaningful attempt to settle their issues prior to bringing the matter to court.

Landlords are encouraged to work with tenants to try to settle any disputes relating to the let property. If they plan to carry out substantial works which are likely to breach the quiet enjoyment covenant, it would be prudent to discuss these with the tenant first and try to agree measures to mitigate the impact of the works on the tenant. In appropriate circumstances this could extend to offering a rent concession. If this approach does not work, the courts are able to award damages to the tenant or impose an injunction to stop the landlord from carrying out the offending act/s. This is likely to be a lengthy and costly process and, as with all litigation, the results will be uncertain. 

The above is intended as an overview of quiet enjoyment covenants and is not a comprehensive analysis of the relevant law. If you have any questions on the above or require advice in this area, please contact our real estate team.