A mural attributed to the elusive street artist Banksy has raised some interesting points about who owns what when a tenant leases a property from a landlord.
MH Real Estate
Friday 9th December, 2016
In the case of Creative Foundation v Dreamland Leisure Ltd and others, the tenant held a 20 year lease of a building which it used as an amusement arcade. The leased area included the structure and the exterior.
The lease included a standard form of repairing obligation requiring the tenant to keep the property in good and substantial repair, a decoration obligation requiring the painting of the outside of the property every 4 years and a prohibition on making alterations without the landlord’s consent – including an express provision against “maiming or injuring” the walls.
In September 2014, a mural was spray painted onto the flank wall of the building (Artwork), purportedly by Banksy.
The following month, the tenant removed the Artwork, re-placed the wall and shipped the Artwork to New York where it had been advised it could expect to sell the Artwork for up to £500,000.
The tenant argued that by removing the Artwork it was acting within its obligations in the lease and that once removed, the Artwork became the property of the tenant by virtue of an implied term of the lease.
The landlord objected and assigned its claim to Creative Foundation (Foundation) to seek the Artwork’s return for the benefit of the local Folkestone community.
Foundation argued that, in accordance with an established principle, the building was attached to and formed part of the land that belonged to the landlord and that once sprayed onto the wall the Artwork became part of the land. The tenant had no right to remove the Artwork by virtue of its repairing and decorating obligations and that by doing so without the landlord’s consent it had breached its alterations obligations.
On giving its verdict, the court firstly held that whilst the Artwork constituted disrepair, the tenant was only required to use prudent remedial methods to discharge its repairing obligations; there was no reason the Artwork could have not have been removed by a less intrusive method such as painting over or chemicalisation and the removal of an entire section of wall constituted interference with the fabric of the building.
Secondly, the court held that once the Artwork had been removed from the property it took on the status of a chattel, the ownership of which belonged to the landlord. Whilst the tenant might have a right to dispose of chattels removed whilst carrying out repairs, that was not the same as an implied term that ownership in such items transferred to the tenant. In any case, even if it could be established that chattels of no significant value belonged to the tenant, this did not necessarily extend to a term being implied for valuable items.
The court dismissed the tenant’s arguments and ordered the Artwork to be returned the Foundation.
Given the well established principle that a building is attached to, and forms part of the land, and the absence of any agreement between the parties to the contrary, the decision is unsurprising although no doubt there would also be public policy reasons against a finding in favour of the tenant. Practically, the immediate effect of the decision will no doubt be a strong deterrent to other tenants who might seek to cash in on street art appearing on their buildings.