Covenant not to derogate from grant

Citation

Waterson, G. and Lee, R. (1999), "Covenant not to derogate from grant", Property Management, Vol. 17 No. 3. https://doi.org/10.1108/pm.1999.11317cab.002

Covenant not to derogate from grant

Nynehead Developments Ltd v. R H Fibreboard Containers Ltd [1999] 02 EG 139

This case is almost a text book example of a breach of the landlord's implied covenant not to derogate from grant. Briefly, the premises concerned comprised an industrial estate split up into a number of units, each let on similar terms, which included "the exclusive right to park vehicles on the tarmacadamed area immediately adjoining [the unit or units in question] provided always that such right is exercised in a manner which will not cause obstruction or nuisance to the lessor or its remaining tenants on the Industrial Estate", together with a right to park vehicles on the forecourt forming part of the neighbouring property "for the purpose only of loading and unloading". Some of the tenants seem to have co-existed quite happily in the exercise of these overlapping rights. One tenant, however, the business of which was servicing and repairing refrigeration units housed in 40 feet trailers, was allowed to leave the trailers on the forecourt whilst the refrigeration units were taken out and repaired; another tenant was allowed to leave its waste disposal vehicles and skips on the forecourt whilst the vehicles awaited repair. The tenants who occupied the neighbouring units found that this was causing them considerable inconvenience, and informed the landlord. The landlord responded politely enough, but said that the use of the forecourt was common to all of the tenants and, in effect, suggested that they should sort any difficulties out between themselves. There was further correspondence, but little was done by the landlord to deal with the problem. The aggrieved tenants, who had anyway put the leases on their own units up for sale, moved out; not unnaturally the remaining tenants made even greater use (or misuse) of the open forecourt area. There was further correspondence and eventually the landlord did take action, instructing solicitors to take the matter up with the remaining tenants. The problems, however, would appear to have continued, condoned it would appear by the landlord, and there was yet further correspondence. Eventually, the aggrieved tenant, no longer occupying the units and unable to dispose of the lease, would seem simply to have stopped paying the rent. In response to a claim for arrears by the landlord, the tenant claimed that by failing to deal effectively with the problems caused by his other tenants, the landlord had repudiated their own lease and that they had accepted such repudiation.

This argument was not accepted by the court: there had certainly been a breach of the landlord's implied covenant not to derogate from grant, together with breach of an express covenant requiring the landlord "to do whatever is reasonably incidental to the efficient operation of the Industrial Estate". The breaches had "become more serious [over time] because they had been deliberate, prolonged and surreptitious in that [the landlord] apparently instructed solicitors to take steps to remedy them while secretly subverting those steps". However, the breaches were not such as to deprive the aggrieved tenant of substantially the whole benefit that it was intended to obtain from its lease: they were an irritant and a minor interference with its business activities and there was no evidence that they had lost even an hour's production themselves as a result. Accordingly, the tenants had not been entitled to regard the lease as having been repudiated, and were liable for the arrears of rent.