Key concepts explained: Derogation of Grant and Quiet Enjoyment in Commercial leases

Key concepts explained: Derogation of Grant and Quiet Enjoyment in Commercial leases

It’s hard to run a business. It’s even harder when your landlord keeps interfering with the commercial space you rent, going back on the terms you both signed. However, there are protections for tenants; Derogation of Grant and Quiet Enjoyment can help protect you.

Derogation from Grant in Commercial Leases

This is a common law concept that means that if party A agrees to give a benefit to party B then Party A should not do anything that substantially deprives B of the enjoyment of that benefit.  This rule against derogation of grant applies in addition to any obligation of quiet enjoyment and is an obligation that is automatically implied into lease.

For example, Party B (the tenant) rented the premises for their bakery from Party A (the landlord), and the landlord included within lease that the tenant has exclusive rights to a storage room to store their baking supplies. The landlord then opens up the storage room to any of their other tenants, without any prior warning or discussion with the tenant. This goes against the agreement in the lease of exclusive rights to the storage room, and would be considered a Derogation of Grant.

The Concept of Quiet Enjoyment in Commercial Leases

The right of quiet enjoyment means a tenant is entitled to use the premises without substantial interference from the landlord. There are four key aspects of quiet enjoyment: peaceful use; exclusive possession; freedom from nuisance; and proper maintenance.

The tenant must satisfy the court that the conduct of the landlord causes ‘substantial interference’ and is more than a mere nuisance or inconvenience.  Even if quiet enjoyment is not expressly included in the written agreement it is also automatically implied into the lease.

For example, if Party A leases a commercial space to Party B, Party A could not enter the store without proper notice or permission and couldn’t inspect or rearrange the merchandise without a valid reason for doing so. Doing so would constitute a breach of quiet enjoyment, as entering without proper notice would interfere with the exclusive possession element, and inspecting or rearranging the merchandise would interview with the peaceful use element, which allows Party B to use the premises peacefully without Party A causing interference with Party B’s business operations.

Remedies

A tenant may seek damages or an injunction requiring the landlord to stop the behaviour or action which is causing a breach of covenant but the outcome is unpredictable and costly.  In some cases, if the breach of quiet enjoyment is severe enough the tenant may be able to terminate the lease. It is better to ensure that any safeguards are expressly included in the written agreement at the outset and for landlords to be careful when making promises to tenants to ensure those promises can be kept so as to avoid issues later.

Contact us

If you need support when resolving a dispute, contact Louise Mackay with our Dispute Resolution team, via e. LouiseMackay@rixandkay.co.uk or t. 01273 766 923