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”.