In a bitter dispute between members of the same family, the court has refused to order a new tenancy of business premises at 139, 143 and 145 Homerton High Street, E9, deciding that the landlord was entitled to possession on the grounds of the tenant’s persistent delay in paying rent and its intention to redevelop part of the premises in Milestar Ltd v Gandesha and another, Central London County Court, claim no. H10CL117.
Under section 30(1)(b) of the Landlord and Tenant Act 1954, the court must first determine whether there has been a persistent delay in paying rent and, secondly, whether – in the exercise of its discretion – a new lease should not be granted.
Save for a single payment in August 2020, the tenant had not paid rent since August 2019, and there were arrears of rent due under all three leases. Rent since 26 March 2020 was to be disregarded under section 82(11) of the Coronavirus Act 2020 (as amended), and so the relevant period was August 2019 to 26 March 2020.
The tenant argued that it had an equitable set-off against the rent in respect of its cross-claims against the landlord which meant that rent was not due at all. Those cross-claims included claims for more than £800,000 for rent received for 141 Homerton High Street to which the landlord was not entitled and to recover loans allegedly made by the tenant exceeding £494,000.
An equitable set-off arises where a cross-claim is so closely connected with the claim that it would be manifestly unjust to allow the claimant to recover without taking into account the cross-claim. It acts as a defence to the claim for rent, not that the rent was not due in the first place. The court decided that none of the claims were sufficiently connected to the rent payable on the properties or to the landlord and tenant relationship to give rise to an equitable set-off.
The question for the court was whether the landlord had established, at the date of the hearing, the requisite intention to demolish or reconstruct the premises under section 30(1)(f) of the 1954 Act. The court was satisfied that the landlord had the necessary intention to demolish the existing buildings and to erect a building with retail space on basement and ground floors and four residential units above.
The landlord had spent time, energy and money on the proposal over more than 18 months, obtaining pre-application advice from the local authority, making a planning application and submitting a revised scheme following a public consultation.
The landlord’s expert estimated the prospects of obtaining planning consent at 50-60%: the tenant’s expert at no more than 40%. However, he had a clear conflict of interest as he had been engaged by the tenant as its planning consultant to object to the proposed development. The court placed little weight on his evidence, preferring the more balanced and independent evidence of the landlord’s expert.
Had the landlord failed on ground (f), the court would still have concluded that it succeeded on ground (b).
Louise Clark is a property law consultant and mediator
