Demolition and Rebuilding where the Tenant is subject to an express Obligation to Repair 1 Comment

Demolition and Rebuilding where the Tenant is subject to an express Obligation to Repair

Proposition:  In certain circumstances, an express covenant by the tenant to keep the fabric of a building in repair need not in itself prohibit complete demolition and rebuilding.

In my blog post “Tenants’ Right to Carry Out Improvements” I drew attention to Section 3(4) of the Landlord & Tenant Act 1927, under which, if works proposed by a tenant are certified by the County Court as amounting to an improvement, the tenant is able to carry out the work irrespective of any prohibition in the lease.  Where Section 3(4) applies, I think it follows that an express covenant to repair will not be an inhibition (as Section 3(4) entitles the tenant to carry out the works “anything in the lease to the contrary notwithstanding”).  Where Section 3(4) does not apply, the question arises whether demolition and rebuilding would in any event be a breach of an express covenant to repair.  The answer is I think “not necessarily”.

The argument is often put forward that a covenant to repair carries with it a duty not to destroy the subject matter of the covenant.  Lewison J (as he then was) in British Glass Manufacturing Confederation v University of Sheffield  [2004] 1 EGLR 41 says (at paragraph 7 of his judgement):-Demolition and Rebuilding

[This] principal is usually traced to Willis J’s direction to the jury in Gange v Lockwood [1860] 2 F&F 115 in which he said:-

“A covenant to repair, uphold and maintain or keep in repair raises a duty not to destroy the demised premises and the pulling them down, wholly or partly, is a breach of such covenant”.

In Hannon v 169 Queensgate Limited [2000] 1EGLR 40, Mr Bernard Livesey QC, sitting as a judge of the Chancery Division, said that the logic behind the principle was “suspect,” but in British Glass the learned judge concluded that the principle thus expressed is in fact not an absolute rule of law.  He said:-

“It is a conclusion reached as a question of construction of the lease”.

The learned judge went on to say:-

“In other cases, judges have considered other covenants contained in the lease in question and reached a contrary conclusion.  In Doe d Dalton v Jones [1832] 4 B&Ad 126, the lease contained a tenant’s covenant to repair the premises “together with such buildings improvements and additions whatsoever as at any time during the said term should be erected set up or made by him”.  The property in question was a dwelling house, and the term of the lease was 40 years.  The tenant took down part of the front of the house and converted the lower part into a shop and exhibition room for pictures.  He removed the old windows and put in larger shop windows.  He stopped up an old door and put in a new one.  It was held that no breach of covenant had been committed”.

Other cases referred to in Lewison J’s judgement in British Glass turned to some extent on the specific wording of the leases in question.  In British Glass itself, the first claimant was granted a lease of land belonging to the defendant university for a term of 1000 years at a rent of £1 per annum.  The tenant was a non-profit making body, whose object was to promote research into glass manufacturing and glassware.  The lease required the required the tenant to erect, and then to keep repair, office buildings and a laboratory, which were to be yielded up at the end of the term.

The lease had been granted at a time when close research co-operation between the university and the first claimant was anticipated.  However, over time, the first claimant’s requirements began to alter; it ceased activities on site and assigned the lease to the second claimant.  The landlord refused consent to an application for consent to replace the laboratory and other buildings, and to utilise the replacement buildings without any contractual restriction on their use.  The claimant sought declarations that it would be lawful for the second claimant to demolish the buildings.  The landlord contended that demolition was forbidden by the terms of the lease or by estoppel (with which we are not concerned here).

Demolition and RebuildingThe claim was allowed.  On the proper construction of the lease, the parties had not intended that the tenant should be obliged to keep in repair for 1000 years the very same building that had first been erected.  The repairing covenants contained in the lease contemplated that other buildings might be erected during the term.  Although the covenant to yield up referred to the original buildings, the overall commercial context required an interpretation that did not prohibit demolition.  The terms of the lease did not in fact prohibit the demolition and reconstruction of the buildings nor their use for residential purposes.

The principal part of the judge’s reasoning appears in paragraph 13 of the judgement:-

Like all questions of construction, the question in the present case turns on what  the terms of the lease, read in context, would convey to a reasonable reader.  Do they lead the reasonable reader to conclude that the parties had intended that the tenant should be obliged to keep in repair for 1000 years the very same buildings that it had first erected?  Or do they lead him to conclude that the parties intended that the tenant should keep in repair the buildings on the site, whatever they happen to be?”

The learned judge then dealt first with the estoppel issue and added:-

Second, the term of the lease is 1000 years.  The period of use contemplated by the parties was as long a period as separated them from Anglo Saxon England.  Apart from a handful of parish churches, there can no buildings in the country still in use in their original form after 1000 years”.

St Martin's Church, CanteburyIt is important to note certain other features of the lease in British Glass; there was no user restriction and no covenant by the tenant not to carry out alterations or improvements with or without the consent of the landlord.  Had there been a covenant against alterations and/or a user restriction, two additional issues might have arisen:-

1.  If the alterations covenant were a qualified one, the question would arise whether the demolition of the existing buildings and the erection of new ones could constitute an improvement so that Section 19(2) of the 1927 Act would apply (requiring the landlord to act reasonably); and

2.  the question of whether the new building was to be used for purposes permitted by the lease.

On the first question, in my earlier blog I referred to two cases.  The first was F W Woolworth and Company Limited v Lambert [1937] Ch.37, which is generally interpreted as meaning that whether or not an alteration is an improvement is to be looked at from the point of view of the tenant.  The second was National Electric Theatres Limited v Hudgell [1939] Ch.553, in which it was decided that the demolition of a building and the erection of a new building was capable of being an improvement (for 1927 Act purposes) even if it was for the purposes of a different business.

The second question above is obviously significant; the tenant would be restricted in the use to which the new building could be put in the absence of a successful application under Section 84 of the Law of Property Act 1925 (which may well be applicable in the case of the kind of lease we are looking at here).

Demolition and RebuildingOf course, leases for 1000 years are unusual but, as I pointed out in my earlier blog post, development leases these days are often granted for terms of up to 250 years and I think similar considerations would apply as in British Glass.  Of course, if the lease contained an absolute prohibition on alterations, the tenant’s only route (apart from Section 84) would be to have the work certified as an improvement so that Section 3(4) of the 1927 Act would apply.

Conclusion:  Much is going to depend upon the commercial circumstances and the exact wording of the lease, but in a very long lease of business premises which could not normally be expected to survive the term it is unlikely that a court would allow a landlord to prevent redevelopment only because the lease contained an express covenant by the tenant to keep the premises in repair.

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  1. [...] a later blog post “Demolition and Rebuilding where the tenant is subject to an express obligation to repair” I pointed out that s.3(4) would override the tenant’s repairing covenant in a relevant lease as [...]

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