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Behind the Wall - The Creative Foundation v Dreamland Leisure

on Thursday, 29 October 2015.

In The Creative Foundation v Dreamland Leisure Ltd [2015] EWHC 2556 (Ch) the court decided the fate of a Banksy, and set out some wider lessons for tenants hoping to cash in on unexpected windfalls.


The Background

Dreamland Leisure was the tenant of a building used as an amusement arcade. The lease obliged Dreamland to keep the building in good and substantial repair, to periodically paint the exterior walls and to make no alterations without the landlord’s consent.

In September 2014, the artist Banksy sprayed a mural (“Art Buff”) onto a wall of the arcade. Realising its value, and in apparent exercise of its powers of repair, Dreamland removed that section of the wall and shipped it to New York for sale. The wall was then repaired.

Both parties agreed that the mural had been a fixture of the land until severed from it, and that it had then become a chattel. They disagreed as to its ownership.

The landlord assigned its purported rights to the mural to the Creative Foundation, who sued Dreamland for trespass and conversion and demanded its return under the Torts (Interference with Goods) Act 1977.

Dreamland argued in its defence that:

  1. it was obliged (or at least entitled) to remove the mural wall to comply with its obligations of maintenance and repair
  2. it was an implied term of the lease that the tenant would take ownership of anything removed as part of those obligations


Obligations to Remove

The first argument was swiftly dismissed. Dreamland was under no obligation to remove any section of the wall (as painting over or scrubbing the mural would also have worked). Where several options exist, a tenant is entitled to take any objectively reasonable approach. Removing the wall – which was significantly more intrusive and conferred no greater benefit – was not, in the circumstances, a reasonable course of action. Dreamland was therefore neither obliged nor entitled to remove the wall.


Implied Terms

The judge then turned to Dreamland’s second argument.

Most leases are silent as to what should be done with waste created during repair and maintenance. Fewer still say what should happen to valuable goods uncovered or created as a result of the works. Unless the parties have turned their minds to these points, it will fall to the court to imply a term in accordance with the usual rules of interpretation.

The starting point is to assume that every part of the land (whether attached or subsequently removed) belongs to the landlord. The burden then lies with the tenant to show that a contrary term should be implied into the lease. Such terms may be implied where necessary, obvious, or required by law, by custom and practice, or by prior dealings between the parties.

It was held that although an obligation to repair may imply a permission to remove and dispose of waste, that would not of itself justify the transfer in ownership of it. Furthermore, even if a term could be implied in respect of the ownership of waste, this would not extend to goods of substantial value.

In the absence of any term to transfer its ownership, the mural remained the property of the landlord (and, subsequently, the Foundation), and the court ordered its return.


Important Lessons

From excavated finds to street art and recyclables, the potential for unexpected windfalls in property are on the rise. Although not every situation can be foreseen, landlords and tenants should agree so far as possible what will happen to hidden value unearthed or created during the tenancy.

 

For specialist advice on real estate or commercial property law, please contact us.