Dhadwal v Heathrow Inn Hotel Ltd [2021] 12 WLUK 211

What is permitted by a user covenant?

A recent case has considered the proper interpretation of a user covenant in a lease which required the tenant not to use the premises other than as a hotel.

The tenant had carried out works to refurbish the existing hotel restaurant, turning the restaurant's outside smoking area into a shisha lounge.

The landlord issued forfeiture proceedings, on the basis that the shisha lounge was said to constitute a breach of the user covenant in the lease and that the shisha lounge was a separate business generating its own revenue.

At first instance, the judge dismissed the claim on the basis that the shisha lounge was simply another activity available to hotel residents and used the analogy of a cigar lounge.

The landlord appealed.

Appeal dismissed

The landlord's appeal was unsuccessful.

On appeal, the Court held that the meaning of "hotel" in the lease had to be considered in the context of the circumstances at the time the lease was granted (in 2014) and on the evidence available. At the time the lease was granted, the demised premises consisted of a hotel with a restaurant (which was clear from the lease wording) and at that time the restaurant had a designated outside smoking area. In this particular lease, the word "hotel" was therefore to be construed more expansively than its simple meaning might suggest.

It was noted that the shisha lounge was in fact used by customers eating at the hotel restaurant, and generating revenue did not make it a separate business. The first instance judge had not erred in law, and this was therefore not a breach of the user covenant in these circumstances.

The take away point from this decision is that permitted uses may be wider (or for that matter narrower) than the explicit wording in the lease suggests, when the context and circumstances at the time the lease was granted are taken into account. In other words, context is everything!