Stonecrest Marble Ltd v Shepherds Bush Housing Association Ltd [2021] EWHC 2621 (Ch)

Summary

The High Court recently held that a landlord was not liable to its tenant, under either the terms of the lease or in tort, for damage caused by water ingress coming from the parts of the building retained in the landlord's ownership. 

The facts

The claimant tenant in this case had been granted a 10-year lease of a ground floor commercial unit from which it sold tiles and tiling products (the Lease). The rest of the building in which the tenant's shop was located remained in the landlord's ownership and was comprised solely of residential units. 

Over time, debris had gradually accumulated in the gutter of the building which eventually caused a blockage in a rainwater downpipe. During periods of heavy rain, water overflowed from the gutter and caused water ingress into the tenant's premises on a number of occasions between September 2017 and November 2019. These instances of water ingress rendered the property unusable as a shop.

Under the terms of the Lease, the tenant covenanted to keep the premises in good repair and condition. The provisions of the Lease also obliged the landlord to:

• allow the tenant quiet enjoyment of the property (provided that the tenant complied with its obligations under the Lease); 
• clean, maintain and repair the common parts; and
• keep the building and the common parts insured against ‘insured risks’ which included ‘flood […] and overflowing of water […] apparatus’.

But, the Lease provided that, where damage was caused by a risk that the landlord did not have to insure, the landlord was not obliged to carry out any repairs which arose as a result of such damage. Further, the landlord's insurance obligations were subject to any exclusions and limitations imposed by its insurance policy, one of which was ‘gradual deterioration or wear and tear’. It was agreed between the parties that the gutter and rainwater downpipe were not common parts of the building, as they formed part of the landlord's retained premises.

The tenant issued proceedings against the landlord for damages. In addition, the tenant argued that the rent cesser provision in the Lease should apply.

The issues

The tenant accepted that the accumulation of debris in the gutter would fall under the ‘gradual deterioration or wear and tear’ exclusion and was therefore not an insured risk. But, it maintained that the landlord was still responsible to maintain and clear the guttering and its failure to do so constituted a breach of its quiet enjoyment covenant and/or it was liable in tort. 

The key issues before the Court were:

• Was the landlord liable to inspect, clean and maintain the gutter?
• Was the landlord subject to an obligation to inspect and clear the guttering to prevent nuisance to the tenant's demised premises, either under its covenant to provide quiet enjoyment or in tort?
• Was the landlord obliged to insure the property against the risk of water ingress?

The decision

The High Court found in favour of the landlord and concluded that, in circumstances where the lease contained a comprehensive scheme of repair and insurance, it was not appropriate for the Court to fill in any gaps by imposing liability on the landlord, either under common law or as a breach of the covenant of quiet enjoyment. 

The Court also held that wording in the Lease did not include an obligation to insure against the risk of damage caused by an overflowing gutter, given the exclusions in the landlord's policy. As a result, the rent cesser provisions did not apply and the tenant's rent obligations remained unchanged. 

Our comment 

It is common for commercial leases to provide a scheme of repair and insurance obligations similar to that in question in this case. The High Court's judgment acts as a stark reminder to both landlords and tenants of the Court's reluctance to step in and interpret a lease with the benefit of hindsight to save a party from a bad bargain. 

Given the possible cost and inconvenience of repairs caused by water ingress, this case should also highlight to tenants the importance of instructing solicitors to take a close look at the repair and insurance provisions to make sure that their landlord cannot avoid liability for any damage which is caused by an uninsured risk.