Redevelopment intentions of landlords under scrutiny after Supreme Court ruling

21 March 2019

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A ruling by the Supreme Court in December 2018 has introduced a degree of complexity to County Court proceedings involving the Landlord and Tenant Act 1954. The Act enables a landlord to refuse to grant a new lease at the end of tenure on the grounds that it intends to carry out works on the building.

Section 30(1)(f) of the Act, referred to as ‘ground f’, provides that “on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding, or a substantial part of those premises, or to carry out substantial work on the construction of the building or part thereof and that he could not reasonably do so without obtaining possession of the holding”.

Traditionally the landlord’s motive had not been considered relevant, but in this case the appellant, S Franses Ltd, a well-known textile dealership and consultancy occupying the ground and basement floors of 80 Jermyn Street in St James, London, challenged the landlord, The Cavendish Hotel (London) Ltd on the grounds that the intended works were conditional – ie, intended for the sole purpose of removing the tenant.

The Supreme Court unanimously allowed the appeal and considered that the purpose of The Cavendish Hotel’s proposed scheme was entirely to remove the tenant. The intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim to a new tenancy. Ground (f) assumes that the landlord’s intention to demolish or reconstruct the premises is obstructed by the tenant’s occupation.

The Supreme Court held that the tenant’s possession of the premises did not obstruct the landlord’s intended works and the landlord did not intend to carry them out if the tenant persuaded the court that the works could be carried out while he remained in possession.

Ryan Pratt, Associate Director with Cooke & Arkwright’s Retail & Leisure agency said, “This ruling means tenants might be more willing to challenge their landlord’s refusal to renew a lease on the grounds that they propose to redevelop the building. The tenant would need to be confident that the intention of the landlord is only to satisfy ground (f) in order to bring about their removal.

“It will also require courts to examine the landlord’s proposals much more closely than in the past in order to establish true intentions, which might not be straight forward to do. Landlords need to be mindful of this ruling and ensure they consider all their options carefully.”

One of the Justices, Lord Briggs commented that the future testing as to whether the landlord’s intentions were conditional, would “probably give rise to factual questions of some nicety, incapable of resolution by the proffer of a simple undertaking to the court, as happens at present”.

He acknowledged that this “may introduce an element of complexity and expense into proceedings in the County Court which, for many years, have yielded to a simple technique for speedy resolution”.

Cooke & Arkwright have been providing rating valuation advice to The Welsh Rugby Union Limited (“WRU”) and Millennium Stadium plc for many years. They were recently successful in achieving substantial reductions in the assessments of the Millennium Stadium, covering both the 2005 and 2010 rating list. These negotiated reductions yielded savings of c.£3.5m which, crucially, allows the WRU to re-invest in rugby throughout Wales. They advise the WRU across the group portfolio including the National Centre of Excellence in the Vale of Glamorgan. The valuation issues across the WRU portfolio are complex requiring a high level of understanding of the funding and finances of professional sport in Wales. Cooke & Arkwright’s experience and understanding of these issues and application to the rating valuation have yielded these substantial negotiated reductions. The WRU and the Millennium Stadium entrust our work to organisations with the required levels in experience and expertise in dealing with these complex issues. I am glad to say we have this expertise in Wales. I would have no hesitation in recommending ratepayers making use of this Welsh based expertise.

Steve Phillips, Group Finance Director, Welsh Rugby Union Group