S Franses v Cavendish Hotel (London) Ltd [2017] EWHC 1670 QB
A look at a recent High Court decision on the meaning of a landlord’s “intention to redevelop” premises, and satisfying opposition ground (f) of the Landlord & Tenant Act 1954 to obtain vacant possession on lease renewal.
Background
Part II of the Landlord & Tenant Act 1954 (“Act”) gives security of tenure (i.e. the right to a new lease) to business tenants. However, a new lease will be refused where a landlord can establish one of statutory grounds of opposition to the grant of a new tenancy, as set out in section 30(1) of the Act. The landlord’s intention to redevelop the premises is one of those grounds (“Ground (f)”).
Facts
The tenant operated an art business from the ground and basement floors of premises on Jermyn Street, St James’s, London. The area benefits from special planning protection from Westminster City Council, which serves to protect and promote art galleries and antique businesses. The landlord operated the Cavendish Hotel in the premises above.
The tenant sought the grant of a new lease. The landlord devised a scheme of redevelopment works that would satisfy the requirements of Ground (f), purely to defeat the tenant’s claim for a new tenancy. The landlord gave the court an undertaking to carry out the works, even though they were unlikely to have any real benefit for the landlord.
The landlord’s proposed works were to redevelop and split the premises for a purpose that would ultimately require planning permission, which had not been obtained (and seemed unlikely to be attainable). In the circumstances, if the landlord did carry out the proposed works, they may ultimately have to reverse them in order to make the premises useful. The landlord did not give any assurance that the works they would carry out would not be reversed immediately after their completion. Finally, the landlord would not carry out the works at all if the tenant vacated voluntarily – so the landlord’s intention was essentially conditional on it having to do the works in order to obtain vacant possession.
Court’s decision
At first instance, the judge dismissed the tenant’s application for a new lease on the basis that the landlord did, at the date of the hearing, have the required intention to carry out the scheme of works it had devised. Accordingly, the landlord was entitled to oppose the grant of a new lease. The tenant appealed to the High Court.
Whilst the tenant appealed on various grounds, the most interesting aspect is the issue of the relevance of the motive behind the landlord’s intention to redevelop (i.e. the fact the landlord only intended to do the works in order to succeed in opposing the grant of a new tenancy). On that issue, the judge agreed with the County Court judge that the fact the intention existed was sufficient, and the Act did not require (or permit) the motives for the landlord’s intention to be considered.
Possible impact of the decision
The purpose of including Ground (f) in the Act seems to have been to strike a balance between landlords and occupying tenants, so that when a landlord had a genuine intention to redevelop premises, they might reasonably expect to be able to obtain possession.
The opposition grounds set out in section 30(1) of the Act could be seen as a “shield” to the tenant’s “sword” of the general right to be granted a new lease. This decision seems to change that position, in making the grounds of opposition a sword that the landlord can use; the landlord can devise a scheme of redevelopment specifically to take advantage of Ground (f) and defeat the tenant’s claim to a new tenancy, even though redevelopment is not what the landlord really wants.
The alternative view is that the courts have simply applied the wording of section 30(1) of the Act, which only requires a landlord to have an intention to redevelop. The Act does not require the landlord’s motives to be good or sensible. On a basic interpretation of the Act, it is correct that the landlord’s motives are irrelevant.
Some practitioners have expressed shock and consider this to be a ground-breaking decision. The reality is that, in practice, landlords have often sought to tailor and bolster their evidence in support of their reliance on Ground (f) to satisfy the court.
The future
The tenant is appealing the decision, including on the relevance of motive versus intention. Therefore, it remains to be seen which of the above views will be correct. In the meantime, both landlords and tenants may need to reconsider their tactics and prospects when dealing with a renewal that is opposed on Ground (f). The decision in this case would give rise to a useful tool for landlords seeking to oppose renewal. However, landlords would be well advised for the time being to be cautious of concocting a scheme of works purely to satisfy Ground (f) in reliance on this case.
Published: September 2017
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