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Supreme Court sounds warning to landlords: contrived building works will not defeat a business tenant's right to a new lease
Landlords seeking vacant possession from business tenants often oppose the right to renewal by creating a development scheme which on its face satisfies section 30(1)(f) of the Landlord and Tenant Act 1954 (“ground (f)”).
A much anticipated Supreme Court decision has clarified the operation of the law and landlords will now need to demonstrate that planned works were not simply a ruse to remove a tenant.
Why is the decision in S Frances Ltd v The Cavendish Hotel important?
- Landlords will be required to show that the proposed works have commercial purpose or practical benefit to satisfy the ground (f) test
- The decision will soon filter into the County Courts, triggering more contentious trials as the Courts closely consider landlords’ true intentions
- Tenants have wider grounds to challenge their landlord’s proposed works
- Disputes are likely where the landlord intends to redevelop and where some of the intended works are not strictly necessary but are included only to satisfy ground (f)
- Landlords may become more likely to seek to ensure any leases are contracted out of the 1954 Act in the first place
The detailed background
In December 2018 the Supreme Court decision of S Frances Ltd v The Cavendish Hotel (London) Ltd  UKSC62;  PLSCS 212 was handed down.
This decision provides important guidance as to the question of intention under ground (f). The relevant test is “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 of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.”
In S Frances the landlord sought to satisfy ground (f) by designing a scheme of works which would lead to the eviction of the tenant. It was common ground that the works had no practical or commercial benefit and the court had found as a matter of fact that the landlord only intended to carry out the works if it had to do so in order to obtain vacant possession. Whilst the Supreme Court confirmed that the landlord’s motive or purpose in carrying out the works is irrelevant, it did refer to an “acid test” when assessing the question of intention. Lord Sumption said “The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.” The sole purpose of the works was to enable the landlord to obtain vacant possession and the works would not have been carried out had the tenant left voluntarily. Rather than the “firm and settled intention” which is required in order to satisfy ground (f), the Court found in this case that a conditional intention was not sufficient to engage the statutory provision.
Real Estate Dispute Resolution
We advise our commercial clients on every type of landlord and tenant dispute in relation to both freehold and leasehold property.
Our commercial clients include nationwide retail chains, property developers, investors and managers of substantial portfolios as well as international organisations with UK property interests.
Our approach ensures that problems are resolved in the most cost effective way and at the earliest stage. We know that our clients will want to avoid litigation in the courts but if matters need to be hard fought then we are highly experienced at dealing with cases at all levels of the court system.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.