Beware the gaps – repairing and insuring obligations in commercial leases

It is often assumed that a landlord has a duty to its tenant of part of its property (where the landlord is also in occupation of a separate part) to prevent or stop water ingress into the leased premises.

However, this case is a reminder for parties negotiating a commercial lease that the courts will scrutinize its terms and are reluctant to fill in any gaps where there is already an established scheme for the insuring and repairing obligations of the parties.

Case Summary

In Stonecrest Marble Ltd v Shepherds Bush Housing Association Ltd [2021] EWHC 2621 (Ch), the Claimant/Tenant held a ten-year lease of a commercial unit located on the ground floor of a building. The upper floors remained in the Defendant/Landlord’s possession. Pursuant to the lease, the Landlord was required to clean, maintain, and repair the common parts and to keep the property and common parts insured against “insured risks”, including “flood and overflowing of water”. The lease provided that the Landlord was not required to carry out repairs where damage was caused by a risk which it was not obliged to insure.

In September 2017, the Tenant reported water ingress into the unit. The ingress was caused by debris blocking a downpipe in the retained parts of the building. The downpipe was unblocked in November 2019. The Tenant brought claims against the Landlord for damages for breach of the covenant for quiet enjoyment and/or nuisance or negligence for failing to inspect and clean out the gutter.

Decision

1. Was the Landlord in breach of the quiet enjoyment provision?

The High Court held that an inclusion of a quiet enjoyment obligation on the Landlord did not impose a positive obligation on it if the express or implied terms of the lease did not require the Landlord to act. There was no express or implied term in the lease requiring the Landlord to clean/maintain the gutters and so, the claim for breach of quiet enjoyment failed.

2. Was the Landlord liable in nuisance or negligence?

The Court concluded that they were bound by the decision in Gavin and another v Community Housing Association Ltd [2013] EWCA Civ 580, where the Court of Appeal decided that when a lease established a scheme of repair and insurance, there was no basis for implying further obligations on the parties.

In this case it was held that the parties had clearly intended for the lease to provide a comprehensive scheme for the repair and insurance of both the leased premises and the retained premises. The lease provided no obligation on the Landlord to inspect and clear the guttering. The High Court held that it was not for the courts to fill in any gaps of such a scheme by finding common law liability.

3. Did the rent suspension provision apply?

There was a provision in the lease for the payment of rent to be suspended if the unit was damaged or destroyed (so as to be unfit for occupation and use) by a risk which the Landlord was obliged to insure. The Court held that the Landlord was not obliged to insure against damage caused to the property by water overflowing from the gutter due to a blockage from the gradual accumulation of debris. The Landlord’s insuring policy clearly excluded cover where the damage was as a result of “gradual deterioration” and so the Court held that the rent suspension provision had not been triggered.