A landlord’s right to develop

Is a tenant's right to park sufficient to prevent a landlord from redeveloping the common parts?

This was the question asked in the recent high court case of Kettel and others v Bloomfield. The Kettel case does not create any new law and was decided on the particular facts of the case, but it does illustrate the need for clear and unambiguous drafting to allow the landlord the flexibility to redevelop.

It is not uncommon for leases, particularly those of residential premises, to reserve a right allowing the landlord to redevelop the common parts. This is an area ripe for conflict, particularly where tenants have paid a significant premium for their interest in the property and do not wish to see amenity areas, such as attractive gardens and valuable car parking areas, diminished.

In the Kettel case, the lease of each flat included the right to use a designated parking space. The landlord did not reserve a specific right to reallocate the parking spaces but had instead reserved a general right to redevelop the neighbouring land notwithstanding any diminution in the light or air benefiting the tenants (the redevelopment provision). The landlord wished to redevelop the common parts, including the allocated car parking spaces, to provide an additional block of flats. The landlord claimed that it was entitled to do this by way of the redevelopment provision and proposed to simply reallocate the tenants’ parking spaces elsewhere in the development. Unsurprisingly, the tenants were unhappy with the landlord’s proposals to further develop and took steps to obtain an injunction to prevent the works from going ahead.

The High Court held in favour of the tenants and awarded the requested injunction. The key points of the judgment are set out below:

• The tenants argued that the car parking spaces were included in the demise granted to each tenant due to the exclusive possession given to each tenant. If correct this would have completely prevented the landlord from redeveloping the car parking spaces, and the air space above, as the tenants would have exclusive possession of these areas. This argument was rejected on the basis that the language used in each lease was clearly intended to give an exclusive right to park, rather than a right to completely exclude all others from the area.
• The court instead held that the tenants’ right to park comprised an easement. The existence of such an easement would also prevent the landlord from redeveloping the car parking spaces (but not the airspace above ground floor level) unless the easement could be varied or extinguished.
• The leases did not contain an express provision allowing the landlord to vary or extinguish the right to park. The landlord argued unsuccessfully that such a right should be implied given that alternative spaces could be provided, and that a degree of temporary interference with the right, for example to repair, clean or resurface the car parking spaces, would be inevitable during the lease term.
• Finally, the court rejected the landlord’s argument that it had reserved a right to redevelop the car parking spaces. The redevelopment clause conferred a right to build on “neighbouring property” but this did not (except in the case of one phase) include the car parking spaces and, in any event, the wording of the redevelopment clause was sufficient only to override rights to light and air, not an express easement to park.

The landlord’s case was not assisted by its behaviour when communicating with its disgruntled tenants. The landlord failed to provide the tenants with substantive details of the proposed alternative spaces and had adopted a “high handed” approach throughout. For that reason, the court was satisfied that an injunction preventing the proposed redevelopment, rather than damages merely compensating the tenant for the loss of amenity was the appropriate remedy. However, the judge did indicate that had the lesser remedy of damages been awarded, damages of £517,500 between the eight tenants and based on a share of the proposed development profit, would have been appropriate.

What lessons can be learned from this case?

• When a development of this nature is set up the leases should contain clear and unambiguous drafting. In this case the redevelopment clause was too vague and did not expressly refer to the car parking and other amenity areas.
• Where practicable, rights, such as the right to park, should be expressed as a contractual right to use a space within a defined area, as allocated from time to time by the landlord, reserving the right for the landlord to relocate the space, within a reasonable proximity, on notice without payment. This will be sufficient to avoid the rights taking effect as a demise or easement that cannot later be varied or extinguished without the consent of both parties.
• Landlords should, where appropriate, ensure that they communicate effectively with their tenants and take note of the dim view that the court in this case took of the landlord’s failure to engage with its tenants. This failure ultimately led to the grant of an injunction preventing the redevelopment entirely rather than the lesser award of damages.

Kettel and others v Bloomfield [2012] EWHC 1422 (CH) (25 May 2012)

This article first appeared in Property Investor News in October 2012.