Business tenancies: Whether a landlord breached covenants in the lease by failing to repair a blocked gutter (Stonecrest Marble Ltd v Shepherds Bush Housing Association Ltd – 2021)

Where a commercial tenant encountered water ingress into its unit as result of a blocked gutter, was the landlord in breach of its repair and insurance obligations and an implied covenant to allow the tenant quiet enjoyment?

The background

In Stonecrest Marble Ltd v Shepherds Bush Housing Association Ltd [2021], the tenant occupied ground floor commercial premises, above which were residential units. The landlord of the building was Shepherds Bush Housing Association Ltd. The tenant encountered water ingress into its unit during a period where it was not trading from the premises, reporting the problem to the landlord and noting that water ingress occurred during times of heavy rainfall and apparently was coming from the retained parts of the building. Following expert investigation, it was found that a blocked downpipe was the cause of the ingress.

Pursuant to the terms of the lease, the tenant covenanted to keep the unit in good repair and condition and was obliged to pay insurance rent to the landlord. The landlord covenanted to use reasonable endeavours to repair, maintain, clean and light the building’s common parts and to keep the property and common parts insured against “insured risks”. The landlord was not required to carry out repairs in respect of any damage caused by a risk that it was not obliged to insure against. The insurance provision was in standard wording and contained a comprehensive list of risks against which the landlord was obliged to insure.

The lease did not contain the usual landlord covenant for quiet enjoyment as an express covenant. The tenant claimed that the landlord had breached an implied lease covenant to this effect and brought claims against the landlord for breach of lease and in tort. In its claim, the tenant sought damages in respect of loss of profits and damage to the unit. The tenant also argued that the rent suspension provision in the lease should apply in respect of the period from its notification to the landlord of the water ingress until the time the gutter was unblocked.

The High Court was asked to consider whether the landlord was liable to inspect, clean or maintain the gutter, whether the landlord was under an obligation to inspect and clear the gutter in order to prevent the occurrence or continuance of a nuisance and whether the landlord should have insured the property against the risk of water ingress.

The decision

The High Court found in favour of the landlord, concluding that the lease contained no express or implied covenant for the landlord to keep the retained parts in repair. Therefore, the tenant could not impose an alternative positive obligation on the landlord by way of an implied covenant for quiet enjoyment, which the landlord would not otherwise be required to perform.

The landlord was not liable for consequential loss of profits; the lease contained a comprehensive scheme of repair and insurance to the property and the retained parts, which did not encompass liability in tort to which the landlord might otherwise have been subject. The High Court found that a court should not ignore the natural meaning of provisions within a lease because it would seem reckless for one party to have agreed to those terms. The rent suspension provisions contained in the lease did not apply, as this clause would operate where damage was caused by a risk against which the landlord was obliged to insure. Furthermore, the landlord’s insurance policy in this case excluded damage caused by gradual deterioration or wear and tear.

Advice and action for landlords

A further decision where the express lease wording was of critical importance, this judgment serves as a useful reminder for parties to ensure that drafting encompasses a comprehensive scheme for repair and insurance for both retained and demised parts to prevent the imposition of any implied covenant upon landlords to repair the retained parts.

The decision is positive on the part of the landlord, finding that the court’s function is to give the lease the meaning and effect that the parties must have intended. Accordingly, no provisions should be implied into the lease which would widen the already comprehensive repair and insurance provisions such that the landlord would be liable for the tenant’s losses.