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27 July 2017

A fixed and settled intention to obtain vacant possession!

Does it matter for the purposes of opposing lease renewal to enable redevelopment if the only reason a landlord is carrying out that redevelopment is to get rid of the tenant?  That is the interesting question addressed in the appeal case of S Frances Limited v the Cavendish Hotel (London) Ltd (2017).  Ground (f), the redevelopment ground of opposition under the Landlord and Tenant Act 1954, applies if:

“(f) …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 the premises or to carry out substantial work or construction on the holding or part thereof and … he could not reasonably do so without obtaining possession of the holding.”

The facts

The tenant, S Frances Limited, occupies 80 Jermyn Street as a retail art gallery, show room and archive for materials relating to its business. 

The landlord devised a package of works, aspects of which had been contrived only to satisfy ground (f).  For example, the landlord proposed demolishing an internal wall only to immediately replace this with a similar wall.  Despite there being little commercial sense in carrying out the works the landlord provided a written undertaking to commence the works as soon as vacant possession has been obtained and to proceed to complete the works.   

The tenant appealed the decision on a number of points and this article focuses on three of the main issues.

The appeal decision

Motive versus intention

The landlord had the intention of undertaking the works regardless of their commercial or practical utility as long as they would lead to the eviction of the tenant.   

The tenant argued that it was inconceivable that it was Parliament’s intention to allow wealthy landlords to simply subvert the protection which it was conferring on business tenants by promising to do works for the sole purpose of getting a Court order for vacant possession.  However, the appeal judge determined that the paragraph deals solely with intention and not motive.  The Court may examine what the landlord intends to do and whether he intends to do it but not why he intends to do it.  The question of “why” might be highly relevant to the “what” and “whether” questions, because the more commercially unviable or synthetic a project, then the closer the Court will wish to examine the authenticity of the landlord’s intention to do the work.  However such scepticism was addressed by the undertaking given by the landlord in this case and so this ground of appeal did not succeed. 

What is a reasonable time for commencing the works?

The landlord must intend to carry out the works “on the determination of the current tenancy” which has been held to mean within a short time of the tenancy ending.  The trial judge in this case held that a reasonable time for commencing the works was within 12 months of obtaining vacant possession.  The appeal judge held that the question of a reasonable time was very much fact-sensitive and that in no other case has a Court been so generous to a landlord as the judge had been in the current case. Therefore the Court was under a particular duty to explain the reasoning and so the tenant was successful on this ground of appeal.

What works should be taken into account when considering whether the ground is satisfied?

It is also necessary for a landlord to show that it could not reasonably do the works without obtaining possession of the holding.  The trial judge failed to identify works which could be carried out under the right of re-entry in the lease which would fall outside of ground (f), and accordingly this ground of appeal was also successful.

Conclusion

Motive has never been relevant to ground (f) but the facts of this case are on the extreme end of the spectrum.  Landlords who consider there are already sufficient hurdles to overcome in establishing this ground will not welcome the idea of also proving their motives and will no doubt wait to see if there is a further appeal on this point.  The other two issues will now be sent back to the County Court for re-determination.


This article was written by Georgina Redsell, for more information please contact Georgina on +44 (0)20 7203 8897 or georgina.redsell@crsblaw.com

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