If a landlord of a retail park reduces the number of parking spaces to fewer than the number specified in a lease with one of the tenants, can the tenant claim damages for loss of profit?
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Under the rule against derogation from grant, someone who agrees to confer a particular benefit on another person must not do anything to substantially deprive the other person of the enjoyment of that benefit (Harmer v Jumbil (Nigeria) Tin Areas Ltd). The rule applies to the grant of easements and rights granted for a term of years. For examples of derogation from grant, see the section entitled ‘Derogation from grant—Substantial interference’ in Practice Note: Derogation from grant.
We also refer you to Practice Note: Derogation from grant—easements and other rights.
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 v London Underground Ltd, the court found that the landlord was in derogation from grant 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 interference must be substantial for the court to give relief. The test has been said to be whether the actions of the landlord render the demised premises unfit or substantially less fit for the purposes for which they were demised. Such an effect is to be distinguished from acts which only interfere with the comfort of a tenant. Thus, where it is found that the tenant has only suffered an interference with his amenities, there will be no breach.
Damages may be awarded where the court finds that a landlord is in derogation of grant. In Platt, a landlord 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. Platt claimed, and was awarded, damages for loss of profit.
As noted in Platt, there is a degree of overlap between a covenant for quiet enjoyment, derogation from grant and breach of an implied term. However, in principle, the tenant can claim damages for loss of profit. As the judgment in Platt illustrates, it can be difficult to establish the appropriate quantum of damages.