Enjoy the Silence: Quiet Enjoyment Covenants

silence final high

Quiet enjoyment refers to a tenant or landowner’s right to the undisturbed use and enjoyment of real property. It is also defined as a covenant that promises that a grantee or tenant of an estate in real estate shall be able to possess the premises in peace, without disturbance or interference from hostile claimants. This concept is so vital to the leasing and/or ownership of real estate that courts have ruled it to be an implied covenant in leases/contract regardless of whether it is explicitly included.

The concept of quiet enjoyment is most relevant in commercial leasing; however, it can also apply to the exchange or conveyance of land ownership. In this case, quiet enjoyment is synonymous with conveying title, free and clear and absent of encumbrances or claims by other parties. Warranty deeds include covenants of quiet enjoyment while quitclaim deeds do not. As the terms suggest, a warranty deed “warrants”/guarantees the transfer of the owner’s interest in the property, while a quitclaim deed simply “quits”/terminates the owner’s interest in the property; allowing the grantee to take possession. Translation: make sure you’re buying land through a general or special warranty deed, unless you want some long lost relatives popping up one day with real or false claims to ownership of your property.

Purchase and sales contracts are “short-term” agreements that dictate the terms of a transfer of interests in real property. Commercial leases, on the other hand, lay out the terms/ground rules for a “long-term” relationship between landlord and tenant; establishing requirements and restrictions. As a result, the concept of quiet enjoyment is one of, if not, THE most important of all and has implications for both the tenant and landlord.

For tenants, quiet enjoyment means a couple things. The first is “quiet;” meaning that if they abide by the terms of the lease they will not be bothered… peace and QUIET. The second is “enjoyment;” meaning that they have the right to use the premises and ENJOY that use. The practical application of these rights varies by asset class but includes the right to exclude others from the premises, the right to clean premises, basic utilities, i.e. electricity, heat, hot water, etc. Basically, the case is that the absence of such services would interfere with the tenant’s use/enjoyment of the property. Imagine leasing an office space in February without heat… not very enjoyable. Therefore, quiet enjoyment can be viewed as a covenant that inure to the benefit of the tenant while placing certain requirements and restrictions on the landlord.

If a landlord breaches the covenant of quiet enjoyment, common law provides at least two remedies for tenants: rental abatement or lease termination. In practice though, commercial leases contain many, common provisions that specifically addresses elements of quiet enjoyment and seek to limit the landlord’s responsibility. One example are lease provisions that address interruption of services. Landlords, typically, try to exempt themselves from any responsibility from service interruptions, i.e. electricity, heat, elevator service, etc., even in cases of their own gross negligence or willful misconduct. Despite the existence of business interruption insurance and the landlord’s own interest in maintaining the property and timely addressing any issues, tenants should push back on such attempts to limit their rights of quiet enjoyment.

The relationship between tenant and landlord is naturally contentious, at first, as both parties seek to extract the maximum concessions from the other all while limiting their own exposure. Tenants should approach lease negotiations skeptically and cautiously, but must also realize that they are being given use of someone else’s property. Commercial leases are legally binding documents in which both parties are agreeing to do and not do certain things. It is justifiable and reasonable for tenants to do everything they can to limit their own liabilities but, at the end of the day, they’re as responsible for abiding by the terms and conditions of the lease as the landlord. Quiet enjoyment may be to the benefit of the tenant but is also a condition of the tenant’s faithful adherence to the terms of the lease agreement. In closing, pay your rent on time and you’ll be fine.

Examples:

Office

Tenant shall have quiet possession of the Premises for the Lease Term hereof, free from any disturbance or molestation by Landlord, or anyone claiming by, through or under Landlord, but in all events subject to all the provisions of this Lease.

Retail

Landlord covenants and agrees that so long as Tenant has not committed an Event of Default, Tenant’s peaceful and quiet possession of the Premises during the Term shall not be disturbed by Landlord or by anyone claiming by, through or under Landlord, subject to the terms and conditions of this Lease, any Mortgage, and all matters of record, or any other agreements to which this Lease is or may hereafter be subordinated.

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