Landlord’s works affecting a tenant’s right of access

O’Flaherty’s (Nassau Street) Limited v Setanta Centre Unlimited Company.

The High Court in Ireland, faced with balancing a landlord’s right to redevelop retained property and a covenant for quiet enjoyment, has ordered the landlord to stop on-going construction works so as to preserve a tenant’s right of access pending a full hearing.

Background

O’ Flaherty’s (Nassau Street) Limited (Tenant) runs a print and design business from a unit in the Setanta Centre, Dublin. It rents that unit from Setanta Centre Unlimited Company (Landlord) under a lease, which has around four years left to run.

Access to the unit is either from Nassau Street, though a concourse, or from Setanta Place through what is currently a fire door. The Landlord is in the process of redeveloping the whole building, having obtained planning permission and started redevelopment works.

The initial building work included the obstruction, by scaffolding and hoarding, of the concourse leading from the unit to Nassau Street. That obstruction is permanent in that it was intended to be replaced, in due course, by the planned new build. The concourse was not to be restored.

The Tenant brought a claim against the Landlord in respect of the works. It argued that the access from Nassau Street was the main access route to its unit, and that this access was protected as it is an implied easement, created by the common intention of the parties, the destruction of which would be an interference with the Tenant’s property rights. The Tenant also relied on the related doctrine of non-derogation from a grant, which essentially provides that a Landlord should not do anything that would substantially deprive a Tenant of the enjoyment of benefits granted under a lease.

The Landlord countered that it is entitled to build on its own premises, and that the lease includes no express right to access by the concourse. Indeed, the original plans of the centre showed no door at the Nassau Street concourse into the tenant’s unit. The Landlord argued that there therefore could be no easement created by the common intention of the parties and no derogation from a grant, since there was no such grant.

The Landlord also argued that, if it is successful at trial, a financial award would be sufficient to compensate the Tenant - rendering an interlocutory injunction unnecessary. On the other hand, the Tenant’s lease will expire in four years, at which point the building works would be almost complete. To grant an interlocutory injunction, it was argued, would cause the Landlord huge commercial losses for the moderately smaller gain of a few more years of access through a concourse which will be redeveloped by 2024 at the latest.

The Law - Easements

An easement (a right over another party’s land) will be implied where:

• Parties have a common intention relating to the use of land; and
• An easement is necessary to carry out that shared intention.

The Law – Injunctions

An injunction is a court order that either requires a party to do something, or prevents it from doing something. In this case, the Tenant sought a court order that prevented the Landlord from continuing its construction works.

The courts in Northern Ireland will grant an interlocutory injunction (an injunction before a full trial) in certain circumstances. Judges have a wide discretion when it comes to such injunctions, and each application will turn on its own facts.

The courts in Northern Ireland were faced with a Tenant’s application for an interlocutory injunction that would have prevented a Landlord from re-developing part of the Abbeycentre, Newtownabbey, in the case of Dunnes Stores (Bangor) Limited –v- NewRiver Trustee 11 Limited. In that case, the Landlord was successful in defeating the Tenant’s application.

Decision

The Tenant’s application for an interlocutory injunction was successful, meaning that the Landlord could not continue construction and the Tenant’s access to its unit via Nassau Street was preserved.

The Judge was satisfied that there “may be an easement”, that there is a fair question to be tried on that point, and that the balance of convenience lies in favour of preventing the “premature destruction” of the disputed access when there is still years left to run on the lease.

An apparent haste on the Landlord’s part to commence construction works, and the indelible impact that works would have on the Tenant, appear to have been key factors in the Judge reaching that conclusion. It was said that:

• Demolition works that were to take place, as part of the re-development, would leave the Tenant’s unit “still standing in the middle”.
• The Landlord had blocked the disputed access with no plan for the Tenant’s unit (other than demolition) evident from its original construction management plan.
• The access had been cut off during lockdown, when the Tenant had ceased business activity for obvious reasons.

The Judge had little sympathy for the Landlord’s argument that the injunction would impact on it financially, saying that the Landlord “in commencing works that could never be completed without the demolition of the premises which cannot, by definition, happen until 2024, have created the problem that now arises.”

In the absence of any amicable resolution between the Landlord and the Tenant, the case will now proceed to a full trial. That will take several months at least, during which the Landlord will be hampered in its efforts to redevelop the centre.

Carson McDowell View

A landlord’s right to redevelop retained property and a tenant’s covenant for quiet enjoyment are interlinked, and can be difficult to reconcile in practice. Disputes are more likely where, as in this case, landlord’s works will have a substantial impact on a tenant’s use and enjoyment of premises.

To minimise the likelihood of a dispute in such cases, landlords would be well-advised to engage and consult with tenants prior to starting works. It was noted in the Abbey Centre case that the landlord had repeatedly sought to meet the tenant to discuss its plans, and Judges are likely to be more sympathetic to landlords who can show that they have attempted to act reasonably in their dealings with tenants.

Communicating a timetable for works, providing regular updates and convening a forum for discussing any concerns that tenants may have as works progress will all mitigate against the risk of a dispute.

If works are being contemplated by a landlord when entering into a new lease, providing tenants with as much information as possible on the proposals will also strengthen the landlord’s position.

Tenants impacted by on-going or proposed works ought to act quickly to enforce their rights, as delay in doing so is one factor that courts will take into account when deciding whether to grant an interlocutory injunction.

Although this judgment was given by a court in the Republic of Ireland, it can be taken in account by a court in Northern Ireland tasked with determining a similar issue.

If you have any queries the Construction Law team at Carson McDowell would be happy to help.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.