Opposing business lease renewal on ground (f): Supreme Court surprise

Tenants occupying premises for the purpose of their business are entitled to seek a new lease on the termination of their current lease under the Landlord and Tenant Act 1954 (the Act).

However, there are various grounds on which the landlord can oppose the grant of a new lease, including the ground contained in s.30(1)(f) of the Act. This entitles the landlord to resist the grant of a new lease if it has a genuine firm and settled intention to redevelop the premises or carry out substantial works of construction and requires vacant possession to do so.

In S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62 the landlord opposed the grant of a new lease to a retail tenant in reliance on ground (f). The landlord designed an “artificial” scheme of works which had no real commercial purpose other than to satisfy ground (f) and therefore to obtain possession of the premises. The landlord had given an undertaking to the Court to carry out the scheme (which would cost in excess of £750,000) but acknowledged that it only intended to carry out the works if the tenant did not vacate the premises voluntarily.

It was held both in the County Court and on appeal to the High Court that the landlord’s motives for undertaking the works were irrelevant and all that matters is that it has the requisite intention to carry them out. However the Supreme Court has allowed the tenant’s appeal and held that ground (f) could not be invoked by the landlord. This was because the landlord’s intention to do the works cannot be conditional on the tenant asserting its right to a new tenancy under the Act. Ground (f) envisages that the landlord must intend to do the works regardless of the tenant’s stance; that intention cannot be conditional on whether or not the tenant is willing to leave voluntarily.

Equally if a landlord genuinely intends to carry out some works regardless of the tenant’s stance but adds additional works to its scheme just to satisfy ground (f), the Supreme Court held that those additional “conditional” works should be disregarded for the purposes of assessing ground (f). The “acid test” is whether the landlord intends to do the works even if the tenant leaves voluntarily.

This is an important case for the property industry, not least because it is not uncommon for landlords to exaggerate their schemes to try to satisfy ground (f). The Supreme Court’s judgment is likely to invite greater scrutiny of a landlord’s intentions and to be an additional hurdle to opposing lease renewals, which may lead to more cases proceeding to court.

For further information please contact real estate litigation partner David Stevens