The latest on redevelopment under the Landlord and Tenant Act 1954

Challenging times for the property industry mean that it is still having to keep all options under review when it comes to commercial – especially retail – property. These options will include potential redevelopment and some recent Court decisions offer a useful reminder of what a landlord will need to show in order to regain possession or insert a break right when it comes to a Landlord and Tenant Act 1954 protected tenancy.

Opposing renewal based on ground (f) (redevelopment)

In Man Limited v. Back Inn Time Diner Limited [2023] EWHC 363, the landlord unsuccessfully opposed the grant of a new lease on the grounds of redevelopment. Whilst the Court was satisfied that the landlord had demonstrated an intention to redevelop, the landlord could not objectively show that it had a realistic prospect of implementing that intention at the end of the lease due to a lack of planning permission and funding.
This case is a lesson in the importance of being organised; the landlord’s case was hindered by the fact that its appeal against the refusal of planning consent was still ongoing at the trial (although the appeal succeeded before judgment was handed down) and by its late disclosure of bank statements to evidence funding, which the judge refused to admit as evidence.

The landlords were similarly lacking in evidence and consequently unsuccessful in the case of GT Motoring Solutions Ltd & Anr v. Gareth Sinclair Williams & Anr (Unreported, County Court, 9 January 2023). In the Court’s view, the landlords had not demonstrated a firm and settled intention to demolish and redevelop. Their plans had changed significantly between December 2020 and December 2022 - from an intention to obtain planning permission to demolish and rebuild the premises to entering into a joint venture for the construction of a development.

In addition, the landlords failed to produce any expert evidence to support their case. The Court considered that expert evidence was necessary to show that there was a realistic prospect of planning permission being granted. The landlords also failed to evidence the cost of redevelopment, the availability of suitable finance and/or that arrangements would be in place to commence any redevelopment at the end of the tenancy.

Inserting a redevelopment break right

In B&M Retail Limited v. HSBC Bank Pension Trust (UK) Limited (Unreported, County Court, 3 March 2023), the landlord failed to serve a counter-notice opposing the grant of a new lease to the tenant’s Section 26 Request within 2 months. Instead, the landlord sought a redevelopment break clause during the subsequent lease renewal proceedings.

The landlord had entered into an agreement for lease with Aldi Stores for a conditional new lease under which Aldi would carry out defined redevelopment works. The Court reviewed the case authorities and concluded that a landlord should not be prevented from pursuing its redevelopment plans. It held that the landlord should be granted a rolling break clause operable immediately upon 6 months’ notice but the term of the lease should be 5 years (not 18 months as requested by the landlord).

Update (October 2023): the tenant’s subsequent appeal to the High Court was dismissed. The High Court confirmed that there is no rule that there has to be a certain period of delay between the grant of a new lease and the exercise of a redevelopment break clause within it.

Lessons learned

All cases turn on their own facts, but the outcomes in these cases show the importance of having key evidence available to the Court when it comes to a landlord of a 1954 Act protected tenancy proving its intention and ability to redevelop.

Please do not hesitate to contact any member of our Real Estate Disputes Team or your usual Charles Russell Speechlys contact if you would like to know more.