Derogation from Grant — Landlord Obligations UK

The Principle: You Cannot Give and Take Away

The doctrine of non-derogation from grant is based on a simple principle: a grantor must not do anything inconsistent with the purpose of the grant. If a landlord lets a warehouse for storage purposes and then converts the adjacent retained building into a nightclub generating noise that renders the warehouse unsuitable for storage, the landlord has derogated from the grant. The leading case is Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200: a landlord let land specifically for the storage of explosives (a use requiring government licence that depended on the land meeting safety requirements); the landlord then allowed adjacent land to be used in a way that threatened the safety licence — the Court of Appeal held this was a derogation from the grant, as it substantially interfered with the very purpose for which the lease was granted.

• Core principle: grantor cannot use retained land in a manner inconsistent with the purpose of the grant — cannot give and take away simultaneously
• Harmer v Jumbil [1921]: landlord let land for explosives storage; allowed adjacent land to be used incompatibly with the safety licence required for the explosives use — derogation from grant
• Aldin v Latimer Clark, Muirhead & Co [1894]: landlord let premises for use as a sawmill (requiring ventilation); built on adjacent land obstructing ventilation — derogation
• Johnston v Holland [1988]: derogation from grant applies to commercial landlords using retained land to interfere with the commercial purpose of the let premises
• No need for physical trespass: derogation from grant operates even where the landlord's actions do not physically touch the leased land — it is the effect on the use of the leased land that matters

Derogation vs Quiet Enjoyment — Key Distinctions

The implied covenant for quiet enjoyment (implied into every tenancy — LPA 1925 s.76; and implied at common law) and the doctrine of derogation from grant are closely related but distinct. The covenant for quiet enjoyment protects the tenant against the landlord's direct physical interference with the tenant's lawful possession of the leased premises — acts done on or to the leased property itself that interfere with possession. Derogation from grant is broader: it covers the landlord using their retained land or taking other action (off the leased premises) in a way that substantially defeats the purpose of the grant. Both doctrines look at what the parties contemplated at the time of the grant and protect reasonable expectations.

• Quiet enjoyment (LPA 1925 s.76; common law): protects against direct physical interference by the landlord with the tenant's possession of the leased premises — acts on the leased land itself
• Derogation from grant: protects against indirect interference — landlord using retained or adjacent land in a way that defeats the purpose of what was granted
• Southwark LBC v Mills [2001] AC 1: noise from adjacent flats (council retained land) did not constitute a breach of quiet enjoyment because the interference arose from normal residential use, not from acts specifically directed against the tenant
• Overlap: a single act by the landlord can breach both the covenant for quiet enjoyment and the doctrine of derogation — e.g., building works on retained land that physically damage the leased premises AND render it unfit for its permitted use
• Actionable interference: the tenant must show substantial interference with the use of the premises as reasonably contemplated at the time of the grant — trivial interference is not actionable

What Conduct Constitutes Derogation?

Derogation from grant requires: (1) an identified purpose for the grant (express or implied from the circumstances); (2) use of the retained land by the landlord (or someone acting under the landlord's authority); (3) that substantially defeats that purpose. The grant need not state the purpose expressly — it can be inferred from the circumstances (type of building; location; what the landlord knew the tenant intended). The conduct must be by the landlord (or persons acting under their authority) — the acts of strangers without the landlord's consent do not constitute derogation. The interference must be substantial — not merely inconvenient — and must relate to the purpose of the grant rather than a collateral disadvantage.

• Identified purpose: the specific use for which the property was let or sold — can be express (lease user clause) or implied from the circumstances of the grant
• Landlord's own conduct: only the landlord's acts (or those of persons acting with the landlord's authority) can constitute derogation — acts of independent third parties are not derogation
• Platt v London Underground Ltd [2001]: ongoing noise and vibration from retained underground operations could constitute derogation where the landlord retained control of the retained land
• Planning restriction by landlord: landlord applying for planning permission or objecting to tenant's planning applications in a way that defeats the leased use may constitute derogation
• Competitive trading: landlord granting a lease to a directly competing business in an adjacent unit may be derogation if the original lease contemplated exclusivity (or if the landlord's letting defeats the obvious commercial purpose)

Remedies for Derogation from Grant

Where a landlord has derogated from the grant, the tenant has several remedies: (1) Injunction: the primary remedy where the breach is ongoing — the tenant can seek an interim or final injunction restraining the landlord from using the retained land in the derogatory manner. The court has a discretion whether to award an injunction or damages in lieu (Supreme Court Act 1981 s.50). (2) Damages: compensation for loss suffered as a result of the landlord's derogatory conduct — including loss of business profits, cost of relocation, and diminution in value of the tenant's lease. (3) Set-off against rent: where the landlord's breach of the derogation principle is so serious that the tenant cannot use the premises for their intended purpose, the tenant may be entitled to set off damages against rent — but this is a high threshold (Eller v Grovecrest Investments [1994]).

• Injunction: most appropriate where the breach is ongoing — court will restrain the landlord from continuing the derogatory use of retained land
• Damages in lieu: court can award damages instead of injunction (Senior Courts Act 1981 s.50) — appropriate where the conduct has already ceased or where an injunction would be disproportionate
• Rent set-off (Eller v Grovecrest [1994]): tenant entitled to set off an equitable cross-claim for damages against a claim for rent — but only where the tenant has a genuine claim exceeding the rent arrears; this is available as a defence in possession proceedings
• Repudiation: in extreme cases where derogation goes to the root of the contract, the tenant may be entitled to treat the lease as repudiated and claim damages for all future losses — effectively terminating the lease on the landlord's breach
• Scotland: similar principles apply under Scots law — landlord's obligation not to derogate from the grant; obligation to give full and peaceful possession; recognised in MacCulloch & Wallis Ltd v Allan (1905)

Practical Implications for Landlords

Landlords managing portfolios of commercial or mixed-use properties must consider derogation from grant when making decisions about retained or adjacent land. Before consenting to a new use or development on retained land, consider the impact on existing tenants. If a new tenant's use is likely to conflict with an existing tenant's lease purpose, the landlord may be exposed to derogation claims from the existing tenant. Landlords should also review existing leases before granting permissions for works or changes of use on adjacent units — and before embarking on redevelopment of retained land during the currency of commercial leases. The landlord's liability is personal — it extends to deliberate actions and to uses consented to by the landlord on retained land, even if carried out by third parties.

• Portfolio management: before changing use of retained units or consenting to development on adjacent land, assess impact on existing tenants' lease purposes
• Review existing leases: check user clauses and any express or implied purposes before making decisions about retained land that may affect existing tenants
• No implied term to maximise profit: landlord has no obligation to maximise the tenant's business success — but cannot actively undermine it through use of retained land
• New tenants: before granting a new lease that directly competes with an existing tenant's business in an adjacent unit, check whether the original lease contemplated exclusivity or whether the new use defeats the original purpose
• Scotland: Scottish commercial landlords should be aware of the equivalent common law obligations — take specialist Scottish legal advice for Scottish commercial property portfolios

Frequently asked questions