A recent case illustrates the risks landlords take if they refurbish tenanted buildings without taking sufficient account of the potential impact on their tenants.

Almost all commercial leases include a provision that tenants are entitled to occupy their premises in ‘quiet enjoyment’, which means the right to occupy without interference or nuisance. In the case in question, the tenant of a modern art gallery whose premises were encased in scaffolding during noisy building works was awarded damages and a substantial rent rebate by a judge on account of the effect on its business.

The company which ran the gallery paid £530,000 a year in rent. Before it signed the 20-year lease, it was aware that steps might be taken to develop the building’s upper stories. However, it was unprepared for the scale of the work, which involved wrapping the building in scaffolding and plastic sheeting.

The gallery had been effectively incorporated into the building site and rendered all but invisible to passers-by. The company argued that its staff had been demoralised, and its potential clients deterred, by the noise of the building works. It launched proceedings against the landlords, alleging breaches of its right under the tenancy to quietly enjoy the premises.

The landlords, who were entitled under the lease to carry out the building project and to install scaffolding, said that they had done what they could to reduce disturbance to the gallery. The judge accepted that the noise was no greater than one would expect on any building site, although it was obviously annoying to customers and staff at what was supposed to be a peaceful and high class gallery.

However, he found that the way in which the scaffolding had been designed and erected paid no or little regard to the interests of the tenant, which had also not been kept informed about the magnitude of the works. In those circumstances, the landlords had not exercised their right reasonably.

The company was awarded a 20 per cent rent rebate – which came to more than £100,000 a year – back-dated to the date on which the scaffolding was erected. The landlords were also ordered to pay damages – equivalent to 20 per cent of the rent – from the date of the judgment until the building works were completed.