Derogation from grant

Citation

(1998), "Derogation from grant", Property Management, Vol. 16 No. 3. https://doi.org/10.1108/pm.1998.11316cab.023

Derogation from grant

Derogation from grant

Chartered Trust plc v. Davies [1997] EG 135

This is an unusual but useful and interesting case on the subject of the landlord's liability for derogation from grant, and one which it may safely be assumed will be of interest to all who are engaged in the management of shopping malls and the like.

Briefly, the case concerned a very small shopping mall in Bognor Regis, known as Clock Walk, comprising eight units in all but let as three double units and two singles, Access to two of the units was direct from the High Street, access to the others from a passage which formed a "dog-leg" from the High Street onto the adjacent side-street. The defendant leased one of these, referred to in the Law Report as the "back units", and was indeed the first to take a tenancy in the new development. Both the defendant and his daughter who actually ran the business, said (and the court accepted) that they had entered into the transaction on the basis that the development would be stated in the agents' particulars, viz:

"Situated in the heart of one of the prime locations in Bognor Regis, CLOCK WALK is an exciting new development in shopping malls that offers the perfect setting for successful retailing with an eye to the future.

The Victorian clock tower in the High Street has long been one of Bognor's best loved landmarks. Now it is set to become a focal point of one of the town's most prestigious retail developments, CLOCK WALK. With its traditional design and bright atmosphere, CLOCK WALK will undoubtedly prove a major attraction for discerning shoppers and the modern mall stall setting will provide an environment that reflects the superior standard of today's retailer.

Situated close to the town's post office, banks and established stores, CLOCK WALK will be one of the most popular locations in Bognor and its combination of prominent position and eye-catching façade will ensure an exceptionally high profile for every retailer in the development."

The judge at first instance had found that this amounted in effect to a misrepresentation: that "this was to be a high-class development with a letting policy of letting only to tenants 'within the category of a high class retail outlet' ... [whereas] ... I think the fact is that the landlords were prepared to let to whoever was prepared to take on these units at a rent that would satisfy the landlords."

The development does not appear to have done very well: one of the shops was let for use as a charity shop, two of the other shops had to cease trading. In a climate of recession, one of these had been re-let to a pawnbrokers' business, which was apparently thriving. The defendants had already had to complain about one of the other tenants (a café proprietor) obstructing access to their premises by putting chairs and tables in the entrance to the passage; the opening of the pawnbrokers was apparently the last straw, and the presence of anything from six to ten young men waiting in the passage outside the pawnbrokers at any one time was sufficient to deter any window shopping or passing trade there might otherwise have been.

How then should the landlord have responded? Proactively, I believe is the usual expression, but as a minimum reactively once it became clear that there was a problem.

"Where a landlord is granting leases in his shopping mall, over which he has maintained control, and charged a service charge therefor, it is simply no answer to say that a tenant's sole protection is his own ability and willingness to bring his individual action. Litigation is too expensive, too uncertain and offers no proper protection against, say, trespassing and threatening members of the public. The duty to act should lie with the landlord... . What is clear is that the landlords could have acted to stop the pawnbroker's clientele queuing in the access and, if necessary, could have cleared the tables and chairs obstructing that access. Then the back shops might have had a chance. This could have been done either directly under the lease, enforcing the covenant against causing a nuisance, or by making rules ensuring that the passage way was kept clear. This might have involved the pawnbroker rearranging the interior of her premises, but that was her problem. Instead, the landlords prevaricated and did nothing. They could have acted effectively and they should have done so. Instead they chose to do nothing, and thereby made the premises materially less fit for the purpose for which they were let. In failing to act to stop the nuisance, in my judgment, the landlords continued the nuisance and derogated from their grant. The trial judge found this to be a repudiation of the lease ­ a substantial interference with the tenant's business driving her to bankruptcy. That was a judgment he was entitled to come to on the evidence he heard."