Certainly this term is familiar to almost anyone involved in real estate. However it is one of the toughest to fully define and often leads to many disagreements in drafting and certainly in interpretation. Just like the Holy Roman Empire in Europe (which was neither Holy, Roman, nor an Empire), the covenant of quiet enjoyment is likewise often neither about “quiet” or “enjoyment!” Most attorneys and real estate professionals are familiar with the term, but what does it really mean?
Most states define quiet enjoyment either by statute or common law as “unreasonable interference with the tenant’s use of the premises.” As with most legal definitions this gives little clarity and leaves a lot to the imagination. Yet, how to get your arms around the concept when you’re negotiating a lease or trying to resolve a dispute between landlord and tenant, tenant and tenant, or all three?
Perhaps the best way to evaluate quiet enjoyment in a particular transaction/agreement is to look at a number of factors:
1. What is the specific use of the tenant?
2. What are the results to other tenants related to this particular use?
3. Where is the tenant located on the property and in regards to other tenants or activities thereon?
4. Is there an REA or OEA that clarifies the allowable use and enjoyment of the premises (i.e. is there an overriding document that defines the specific and systemic activities that will occur at the center, office park or building?)
5. What exactly have the parties negotiated as far as the covenant of quiet enjoyment in the LOI or the lease? Is there simply a legal recitation of the term or have landlord and tenant built in particular expectations, uses and limitations?
6. How do we all get along? In other words, what are the global expectations of the landlord and all of the tenants regarding the property and the activities and services and ancillary events that may occur during the tenancy?
7. In specific disputes between tenants, who was there first?
8. Last, and certainly not least, are there any exclusives or other restrictions that would limit or prohibit a tenant’s use intended of the premises.
Obviously, there are challenges in all types of commercial real estate. In industrial/flex properties, access, and security may be paramount. In office properties, amenities, parking, utilities and common use of services may be important. Certainly in retail properties all of the classic indicia of quiet enjoyment would likely apply: noises, vibrations, odors, signage, access, and common area uses would be highly important to consider. Perhaps the most challenging properties are mixed use projects that may involve residential, retail, office and other related uses that may conflict with each other in many ways.
Further, landlords and tenants need to look at additional factors in evaluating the length and breadth of the duty of quiet enjoyment, such as:
1. What rights and responsibilities should be assigned or restricted as between multiple tenants?
2. Is there a potential for adjoining landowners or landlord contractors/vendors to interfere with the quiet enjoyment of the tenants?
3. What duty does the landlord have to control the activities of other tenants which may be interfering with the intended use and quiet enjoyment of a particular tenant?
4. Finally, there are modern trends and challenges that should be considered in drafting and interpreting the language in a quiet enjoyment obligation? For instance, what about the expectations of millennials as opposed to baby boomers, technology, green buildings etc.
As with all negotiations and dispute resolutions, the keys are investigation, communication and monitoring. The landlord should share its knowledge and goals for the Property. The tenant also needs to be transparent about its intended use now and in the future. Certainly there will be some weighing of the factors involving each party (size of tenant, location on the property, integration with existing and future or potential uses for the project); however, the ultimate goal is co-existence and mutual fulfillment of business goals.