On the Ninth Day of Christmas....intention to occupy and subsequent damages under S37A of the Landlord and Tenant Act 1954
In the case of McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd [2024], McDonald’s sought a new lease for premises in the Riverside Building, opposite the Houses of Parliament on the South Bank in London. The restaurant was located in an important strategic location for the Claimant which they wished to retain, but the renewal was opposed by their landlord, Shirayama Shokusan Company Ltd. The landlord claimed they intended to occupy the premises for their own business purposes, specifically to open a Japanese restaurant named Zen Bento, by November 2019. The landlord had given an undertaking to the court to commence trading as Zen Bento as soon as reasonably practicable after obtaining vacant possession.
However, the landlord failed to do so, instead, it opened a restaurant in March 2020, which was closed subsequently due to COVID restrictions. It then opened a coffee shop and bakery, in early 2021. The Claimant therefore sued the Defendant in deceit and for damages under section 37A of the Landlord and Tenant Act 1954 (the “1954 Act”).
Key Issues
1. Intention to Occupy: The central issue was whether the landlord genuinely intended to occupy the premises for their own business purposes, as required under ground (g) of section 30(1) of the 1954 Act.
2. Misrepresentation: McDonald’s alleged that the landlord misrepresented their intentions to the court, claiming they never intended to open Zen Bento and instead had various other plans for the premises.
3. Undertaking Compliance: The court considered that, as evidence of its intention, the landlord provided an undertaking to the court that they would occupy the premises through their subsidiary and open Zen Bento.
Decision
The court found that Mr. Okamoto for the landlord, had deliberately misrepresented the landlord’s intentions. Evidence showed that immediately after the judgment, Mr. Okamoto proposed various other uses for the premises, indicating that the intention to open Zen Bento was not genuine. The court concluded that the termination order was obtained by misrepresentation, making the landlord liable to pay compensation to McDonald’s under Section 37A of the 1954 Act.
Legal Implications
1. Misrepresentation and Lease Termination: This case underscores the importance of genuine intention in lease termination cases under the 1954 Act. Landlords must keep in mind when opposing lease renewals on the ground of own occupation that they have a firm and settled intention to occupy the premises for their stated business purposes.
2. Court’s Reliance on Undertakings: The decision highlights the court’s reliance on undertakings provided by landlords. Misrepresentation in such undertakings can lead to significant legal consequences, including compensation claims.
3. Section 37A Compensation: The ruling demonstrates that tenants have a remedy against landlords under Section 37A, which allows tenants to claim compensation if a termination order is obtained by misrepresentation or concealment of material facts.
Comment
The judgment serves as a critical reminder for landlords about the necessity of honesty and clarity in their intentions when opposing lease renewals. Misrepresentation not only undermines the legal process but also exposes landlords to substantial compensation claims.
