Leases often contain clauses giving the landlord the right to carry out building works or upgrades during the term of the lease.
Author: Stella Sun, Senior Associate at Bartier Perry
These clauses can be general—to cover future repair or renovation works, or specific – to cover planned landlord upgrades, and will often include a requirement that the landlord can only carry out the works if it does not cause more than minor disruption or inconvenience to the tenant.
But what happens if these works cause more than minor disruption or inconvenience to your business?
Tenant’s right to quiet enjoyment
Under every lease, a tenant has the express or implied right to ‘quiet enjoyment’ – which means you have the right to use or occupy the premises without interference from the landlord or persons claiming through the landlord.
The landlord also has an implied obligation not to derogate from the grant of the lease; that means, the landlord cannot do anything that would prevent you from enjoying the premises.
Building works will generally involve noise, dust and vibration, and in some cases, interference with access to the premises or reducing visibility of the premises (for example, where scaffolding is erected).
This disruption to your business could amount to a breach of quiet enjoyment or derogation from the grant.
So, if a landlord wants to carry out building works, it must clearly be authorised in the lease.
Landlord works clauses
Before entering into a lease it is important to find out whether there are any planned landlord works, or whether the lease allows the landlord to carry out repair and/or building upgrade works.
Some important considerations include but are not limited to the following:
- What works are planned or authorised by the lease
- Does the lease prevent the landlord from causing more than minor disruption or inconvenience when carrying out such works
- Does the lease require the landlord to act promptly and complete the works by a specific time frame
- What remedies are available to you if the landlord fails to meet this time frame
- On what grounds can the landlord access the premises to carry out the works
- Is the landlord required to provide prior notice to you before accessing the premises.
Tenants do not have to accept unreasonable proposals for work that may interfere with your business, so it is important to check your lease and negotiate these clauses carefully.
Substantial disruption or inconvenience
Where a lease specifically authorises landlord works and those works are properly carried out by the landlord in accordance with the lease, any minor disruption or inconvenience such as noise, dust or reduced access will not be a breach of the covenant for quiet enjoyment or derogation from the grant.
But if the landlord’s works cause significant disruption or interference to your business or the landlord has not taken reasonable steps to minimise such disruption, you may be entitled to specific remedies including damages under common law, an injunction to stop the works, or if the breach is serious enough, termination of the lease if damages are insufficient compensation. Tenants may seek to negotiate a rent free period as compensation for disruption while works are being carried out to avoid having to take legal action. Some examples of scenarios where the landlord’s works have been deemed to be a breach of the right to quiet enjoyment or derogation from the grant entitling the tenant to specific remedies include:
- Telex (Australasia) Pty Ltd v Thomas Cook & Son (Australasia) Pty Ltd (1970) 2 NSWR 257 – where the landlord was found to have interfered with the tenant’s use of the premises which included the sale and testing of hearing aids, by the noise and vibration caused by building repairs.
- Telstra Corporation Ltd v Sicard Pty Ltd (2009) ACML 85-337; [2009] NSWSC 827 – where the landlord was found to have interfered with the tenant’s ability to conduct its call centre operations as a result of works undertaken to the façade of the building generating considerable noise, vibration and dust.
- Owenv Gadd (1956) 2 All ER 28 – where the erection of scaffolding in the course of repairs was found to be an interference with the tenant’s access to the premises.
- Lend Lease Development Pty Ltdv Zemlicka (1985) 3 NSWLR 207 – where the tenant was entitled to damages against the landlord for loss incurred by the theft of items as a result of the landlord’s builders failing to lock the doors to the premises.
Considerations for tenants
If landlord’s works are causing significant disruption or interference with your business, review your lease to see if the landlord is complying with its obligations and/or what remedies are available to you.
Tenants should be aware before entering into a lease whether any future works are proposed and if so, discuss and, where appropriate, document the proposed start date and duration of the works, the scope of the works and any compensation you may be seeking as a result of disruption or inconvenience. This may include but is not limited to a rent-free period, or rent reduction whilst the works are being carried out.
If you require more information, please contact the property law team at Bartier Perry.