Commercial Property

Commercial Landlords: Property redevelopment points to consider

October 12, 2016

In a recent County Court case, the court considered whether the rights of the landlord to develop its property were in conflict with the building’s Right to Manage Company (RTM).

An RTM allows leasehold property owners to take over management of a building even without the consent of the landlord. The RTM would be responsible for duties such as service charges, structural and communal upkeep and dealing with complaints. (Find out more here).

What happened?

In (Francia Properties Ltd v Aristou), the landlord of a block of eight flats sought to redevelop the roof space on top of the block.  The building was managed by the RTM of the building who objected to the development on a number of grounds. 

What the Court said...

1. Did the lease prohibit the landlord from altering, developing or building upon the block of flats?

  • The lease stated that the landlord had the right to build upon the development even if it obstructed light.
  • The judge ruled that the tenant was not entitled to any right of access, light or air to their flat if it meant a restriction to the use of any adjoining land by the landlord for example, for building works.
  • As the roof was part of the landlord’s retained land, the judge decided he would be entitled to develop on this roof space.

Essentially, the rulings came down to the clear wording in the lease. The judge stated that the lease did not state in any clear terms that the landlord had given up or altered any of his building rights

2. Did the construction of the new flat amount to a breach of the agreement for quiet enjoyment of the flat and was the landlord in breach of the lease by restricting the amount of direct sunlight received by the top floor flat?

The judge concluded that the new flat would not make the top floor flat substantially less fit for purpose due to the increased shadowing from the sun. Also, the fact that the landlord may want to redevelop the property in the future wouldn’t have been outside the realms of possibility when the top floor flat was leased. 

3. Did the construction of the new flat unlawfully interfere with the management functions being exercised by the RTM?

The current law makes provision for RTMs to manage self-contained buildings as an alternative for tenants who are dissatisfied with the management of the building or who want make certain decisions without having to go through the landlord.

In this case the judge stated that whilst legislation gave the RTM certain control over the building, the law was not intended to take property rights away from the landlord. Ultimately, the judge ruled that that the construction of new dwellings was not the function of the RTM but responsibilities would be restored to the RTM after construction.

Key takeaways for commercial landlords when considering redevelopment of a property

Look at the wording of your lease very carefully!

  1. The ruling could have been very different had there been wording in the lease to show that the landlord has given up or altered his building rights.
  2. Commercial development projects initiated by a landlord could alter the responsibilities of an RTM and the presence of an RTM did not necessarily mean there would be an automatic bar on development if they objected.
  3. When planning such developments, commercial landlords should take all reasonable steps to minimise the disturbance to the usual management functions of the RTM.

In this case, the judge found in favour of the landlord however, the RTM has been granted leave to appeal so we await further judgement and will update you accordingly on any developments.

If you have a question regarding commercial leases or commercial development, our commercial property team would be happy to discuss them with you.  

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