Supreme Court decision restricts landlord’s right to terminate lease
Commercial tenants can enjoy security of tenure under the Landlord and Tenant Act 1954.A commercial landlord can only terminate a commercial tenant’s lease on the basis of one of the specified statutory grounds set out in Section 30(1)(f) of the Landlord and Tenant Act 1954
Ground (f), commonly referred to as the redevelopment ground, states that a landlord can oppose a lease renewal if:
"... 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 of construction on the holding or part thereof that he could not reasonably do so without obtaining possession of the holding”
Whilst the landlord would have to establish a firm and settled intention to carry out the works in question ground (f) did not previously preclude a landlord from proposing to undertake a scheme of development, even if those works were not commercially or practically viable for the purposes of denying their tenant a lease extension. The landlord’s motive for carrying out the works was not considered a relevant factor.
This allowed some landlords to effectively buy their way to a lease termination by proposing to undertake works they would not otherwise have undertaken if the tenant had left of their own accord.
Supreme Court Decision
This scenario was considered by the Supreme Court in the recent case of S Franses Ltd v The Cavendish Hotel (London) Limited.
In this case the landlord was seeking to rely on ground (f) when refusing a lease renewal. The landlord did not dispute they had devised a proposal for works for the express purpose of satisfying ground (f) and obtaining vacant possession.
The works had no practical or commercial utility but the landlord provided a written undertaking to the court confirming they would start work after the tenant vacated the property. The High Court found in favour of the landlord on the basis that landlord clearly had the intention to do the work and their motive for carrying out those works was not relevant.
On appeal the Supreme Court found in favour of the tenant stating that in order for a landlord to have the required “firm and settled intention” the landlord must intend to carry out the works irrespective of the tenant’s claim for a lease extension.
If the landlord only intends to carry out the works if their tenant seeks a lease renewal then their intention is only conditional and therefore they will not have the required firm and settled intention.
Effect of the Decision
The facts of this decision were unusual given the landlord’s brazen intention to only carry out the works to get rid of the tenant. However, it highlights how a Landlord’s motivations when seeking to rely on ground (f) will be under more scrutiny than ever.
Landlords and tenants should take legal advice as early as possible when considering if to seek or oppose a lease extension.
For further advice or help with any of the issues raised in this article, please contact Phillip Feather.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.