Derogation from grant and the covenant for quiet enjoyment
Derogation from grant and the covenant for quiet enjoyment

The following Property practice note provides comprehensive and up to date legal information covering:

  • Derogation from grant and the covenant for quiet enjoyment
  • The rule against derogation from grant
  • The principles
  • Has there been a derogation?
  • Substantial interference
  • Retained land
  • Future use
  • Right granted for term of years
  • Overlap with letting schemes—residential properties
  • Overlap with implied easements
  • More...

The rule against derogation from grant applies in addition to any obligation of quiet enjoyment. It is not excluded by an express covenant for quiet enjoyment. There is a substantial overlap between the two, but there is a fundamental difference. The obligation not to derogate from grant runs with the land. If a landlord lets one property and sells the adjoining one, the buyer is not liable to the adjoining tenant on the covenant for quiet enjoyment as they are not, and have never been, its landlord. However, they are liable to the tenant on the obligation not to derogate from grant. The seller/landlord became bound not to derogate from its grant to the tenant in respect of the property it subsequently sold when it granted the lease of the other property to the tenant and the obligation runs with the land.

The covenant for quiet enjoyment focuses on the use by the tenant of the demised premises, whereas the obligation not to derogate from grant focuses on the use which the landlord makes of premises it retains.

The rule against derogation from grant

The rule against derogation from grant applies to the grant of easements and rights granted for a term of years, as well as to leases. The principle is that someone who agrees to confer a particular benefit on another must not do anything

which substantially deprives the other of the enjoyment of that benefit. That would be to ‘take away with one hand what is given with the other’.

While not a covenant, the rule prevents a landlord from substantially interfering with any use for which its premises are specifically let.

The principles

As set out in Platt v London Underground, the general principles to be applied to derogation from grant are:

  1. A landlord, like any other grantor, cannot derogate from his grant by taking away with one hand what he has given with the other

  2. In order to determine whether a specific act or omission constitutes a derogation from grant, it is self-evidently necessary to establish the extent of the grant

  3. 'The exercise of determining the extent of the implied obligation not to derogate from grant involves identifying what obligations, if any, on the part of the grantor, can fairly be regarded as necessarily implicit, having regard to the particular purpose of the transaction when considered in the light of the circumstances subsisting at the time when the transaction was entered into'

  4. There is a close connection, indeed a very substantial degree of overlap, between the obligation not to derogate from grant, the covenant for quiet enjoyment, and a normal implied term in a contract

  5. The terms of the lease will inevitably impinge on the extent of the obligation not to derogate. Express terms will obviously play a part, possibly a decisive part, in determining whether a particular act or omission constitutes a derogation. An express term should, if possible, be construed as consistent with the 'irreducible minimum' implicit in the grant itself. But a covenant relied on by the landlord, if construed as ousting the doctrine in its entirety, is repugnant, and should itself be rejected in its entirety

  6. When considering a claim based on derogation from grant, one has to take into account not only the terms of the lease, but also the surrounding circumstances at the date of the grant as known to the parties

  7. One test which is often helpful where the act complained of is the landlord's act or omission on adjoining land is whether the act or omission has caused the demised premises to become unfit or substantially less fit than the purpose for which they were let

  8. That formulation, though helpful, may in many cases be too generous to the tenant. Permitting a competing business to be run from a next door property is not, of itself, a derogation from grant

  9. The circumstances as they were at the date of the grant of the lease are very important. A claim will fail if it is based on an alleged defect in the demised premises which was present as at the date of the grant of the lease

  10. But, given that a lease is essentially prospective in operation, the central issue, where the complaint is of activities on the neighbouring premises owned by the landlord, is not merely the use to which the adjoining premises are put at the date of the grant of the tenancy, but also the use to which they may reasonably be expected to be put in the future

  11. When assessing what the parties to a contract actually must have contemplated, one should focus on facts known to both parties and statements and communications between them

Has there been a derogation?

To assess whether there has been a derogation from grant, the extent of the grant must be established. Express terms (including any rights reserved to the landlord) are important, but a covenant cannot oust the rule. In Platt, the landlord, London Underground, was in derogation from grant where it closed the station exit at busy times so that passing trade to the tenant's newsagents' premises was greatly reduced. The court reached this decision despite the fact that the lease contained a covenant that the tenant could not object to the landlord carrying out its business. The tenant cannot be deprived of an 'irreducible minimum' protection.

The surrounding circumstances at the date of grant are also very important. Any implicit landlord’s obligations must be identified having regard to the particular purpose of the transaction at the time it was entered into.

In Southwark London BC v Mills, a claim based on an alleged defect in the demised premises present at the date of the grant of the lease failed.

In First Tower Trustees v CDS, the presence of asbestos at the property did not amount to a derogation from grant (or a breach of the covenant for quiet enjoyment—as to which see below). This was not a case where the landlord had done anything or omitted to do anything after the lease which derogated from its grant or interfered with quiet enjoyment. The interference was the inability of the tenant to go into occupation until works were carried out to remove the asbestos.

In Petra Investments v Jeffrey Rogers, there was insufficient evidence to find an enduring obligation to maintain a particular tenant mix. There was no express obligation in the lease and the tenant had agreed to accept a reduction in service charge in full and final settlement of any claim in respect of the creation of the unit it was complaining about.

In Carnegie v Nolan 19 March 2018 (unreported), there was a derogation from grant of the right to use a parking area, where the defendant exercised the express right to move the spaces to a position almost 400m away—further than a nearby public car park. The court held that the re-designation of the parking area should have substantially the same convenience as the existing designation. See News Analysis: Construing the true extent of access rights to be granted for use of land.

In assessing what the parties contemplated, a fact which could only be known to one party could not, save in exceptional circumstances, be a legitimate part of the factual matrix.

Substantial interference

Any interference must be substantial. Use of adjoining land which merely makes the user of the demised premises more expensive is not a breach of the obligation. Nor, in the absence of a covenant not to, is it a derogation from the demise of a shop to let adjoining premises to a trade rival.

Retained land

Where a lease is made for a particular purpose, the landlord is under an obligation not to use adjoining land retained by him in a way that renders the demised premises unfit or materially less fit for that purpose.

Although it is usually invoked against a landlord, the rule applies equally to a tenant who uses the demised premises to interfere with the use by the landlord of the land it retains.

Future use

The key issue is not just the use to which adjoining premises are put at the date of the grant of the lease, but also the use to which they may reasonably be expected to be put in the future.

In Lyttelton Times v Warners, there was no derogation where the landlord’s machinery caused a nuisance to the demised premises. Both landlord and tenant had concluded at the outset of the lease that it would not and the tenant had not sought to insert any term protecting himself if that conclusion turned out to be wrong.

In Dick v Norton there was no derogation where a landlord interfered with the rights of a sporting tenant, but by acts which accorded with ordinary farming practice which could have been contemplated at the date of grant.

Right granted for term of years

Where a profit a prendre, such as a right of shooting or fishing, is granted for a term of years, the grantor may not fundamentally change the character of the land subject to the profit, although acts done in the ordinary management of the land which interfere with the rights will not of themselves constitute a derogation from the grant.

Overlap with letting schemes—residential properties

Where the tenants of a block of flats are required to use their flats for private residential purposes only, a letting scheme (binding in equity as a restrictive covenant) may be implied. The landlord cannot convert part of the block into business premises as this may amount to a derogation from grant.

Overlap with implied easements

An easement is implied in favour of a grantee where it is required to carry out the common intention of the parties. The rule against derogation from grant may also apply where there has been no previous enjoyment of the alleged easement, if from the contract between the parties it must be assumed that the grantee was intended to use the land granted in a manner for which that easement would be reasonably necessary. For example, in Frederick Betts v Pickfords, a covenant by tenants to erect buildings according to plans containing windows implied a right to light and air necessary to those windows.

Other examples of derogation and non-derogation from grant

Examples of derogation from grant include:

  1. the construction near to the demised premises of new units intended to be used for a purpose which would compete with the permitted use of the demised premises. In Oceanic Village v Shirayma Shokusan, the property was let for use as an aquarium-related gift shop and the landlord had covenanted not to permit any other gift shop in the aquarium building. The court held it would be a derogation from grant for the landlord to open two gift shops selling similar aquarium related products in an adjacent walkway outside the building itself

  2. building on retained land so as to interfere with the access of light to a house which is to be built on adjoining land demised for the purpose of having a house built on it

  3. building on retained land sufficiently close to the demised premises to render it illegal for the tenant to continue to use them for the purpose of storing explosives

  4. the installation of speed humps on the road through an estate which were the principal cause of a downturn in the tenant's business (the landlord conceded this was a derogation from grant)

Examples of acts which are not a derogation from grant include:

  1. the erection by the landlord of an external staircase outside the windows of a flat interfering with the tenant’s privacy – the premises could still be used for residential purposes and the only interference was with the comfort of the tenant

  2. mere interference with a tenant’s amenities

Exceptions

A tenant cannot take advantage of the rule in order to do something unlawful. In Molton Builders v Westminster City Council, allowing the local planning authority to take enforcement proceedings against an unlawful use was not a derogation by a landlord.

The obligation not to derogate from grant binds those claiming under the landlord. However, the rule does not extend to property acquired by the landlord after the grant of the lease except in certain exceptional circumstances (eg erecting a hoarding on later acquired property deliberately to conceal the grantee’s hoarding was derogation where it was clearly motivated by spite). This is because the rule is limited by the state of affairs existing when the lease was granted and it is not possible for a landlord to grant that which they have not got.

The rule does not prevent a corporation which has granted a lease from exercising a statutory right for the benefit of the public (eg the establishment of a market).

The covenant for quiet enjoyment

Express or implied covenant

Every lease contains either an express or implied covenant for quiet enjoyment. In the absence of an express covenant, a covenant will be implied. The covenant includes a confirmation that the landlord has the title to grant the lease and an obligation to put the tenant into possession. It extends to oral lettings.

There is also an implied contractual obligation in agreements for lease which are equivalent to an actual demise (ie where the tenant has taken possession and the agreement can be enforced by specific performance).

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