Louise Clark analyses a recent ruling on landlord’s intention under the Landlord and Tenant Act 1954.
Key points
- A flat occupied not only as a dwelling but also for the purposes of a business is capable of being a business tenancy
- Whether a landlord intends to occupy premises under ground (g) is essentially a question of control
In Royal Borough of Kensington and Chelsea v Mellcraft Ltd [2024] EWHC 539 (Ch); [2024] PLSCS 49, the High Court has issued a salutary reminder over what constitutes a business tenancy under the Landlord and Tenant Act 1954 and what a landlord’s intention actually means for the purpose of opposing a new tenancy under ground (g) of section 30(1).
The law
The 1954 Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant for the purposes of a business carried on by him or for those and other purposes (section 23(1)).
Occupation or the carrying on of a business by a company in which the tenant has a controlling interest or – where the tenant is a company – by a person with a controlling interest in the company shall be treated as equivalent to occupation or the carrying on of a business by the tenant (section 23(1A)).
“Business” includes a trade, profession or employment and any activity carried on by a body or persons whether corporate or unincorporate (section 23(2)).
Section 30(1)(g) provides that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him there, or as his residence. It is for the landlord to show, subjectively, a firm and settled intention to occupy the flat for its own business purposes and, objectively, a reasonable prospect of being able to do so: Dolgellau Golf Club v Hett [1988] 2 EGLR 75.
The background
Mellcraft was incorporated in May 2012 and its sole director and 50% shareholder was Amir Moaven. The case concerned the first and second floor flat at 269 Portobello Road, London, W11. The property was in a poor condition when, in 2009, Moaven applied to take a lease of the property for “mixed use” with one room intended as an office.
In September 2012, the council granted Mellcraft a five-year lease for “a single tenancy dwelling” of the property. At the same time Mellcraft took five other leases of premises from the council.
Following refurbishment of the flat it was occupied by Moaven, his partner and their daughter on assured shorthold tenancies from Mellcraft, which expired before the contractual term date.
In May 2017 the council served a notice under section 25 of the 1954 Act specifying 1 December 2017 as the lease termination date and stating that the council would oppose a claim for a new lease on ground (g) because it intended to occupy the flat for the purposes of providing temporary accommodation to homeless families.
On Mellcraft’s application, the county court determined two preliminary issues:
- That Mellcraft occupied the flat for the purposes or partly for the purposes of its business at the date of expiry of its lease of the property; and
- That the council had failed to establish that it intended, on termination of the tenancy, to occupy the holding for the purposes or partly for the purposes of its own business.
Was the tenancy a business tenancy?
While critical of Moaven’s evidence as to the precise nature of Mellcraft’s business, the judge accepted that Mellcraft, as tenant of the flat, was carrying on business at the property in respect of the five leases which it held from the appellant, collecting rents from sub-lessees and paying them to the council.
The judge rejected the council’s argument that the situation was just an example of a home office or a company director taking work home. Mellcraft had no other office premises and all of its documents were stored at the flat.
A lease of residential premises – a flat or a house – can be brought within the 1954 Act, if there is sufficient business use: Cheryl Investments v Saldanha [1978] 2 EGLR 54. So section 23(1) of the 1954 Act was satisfied.
Ground (g)
It was common ground that the letting of the flat as temporary accommodation would be a business activity of the council.
Had the council’s intention been to grant licences of temporary accommodation in fulfilment of its interim or relief duty it might have retained sufficient control over the premises to enable the court to conclude that it occupied the flat for the purposes of ground (g).
However, the council’s evidence was that the flat would be let on a standard tenancy granted under its homelessness function and the tenants would be exclusive occupiers.
Consequently, it would not retain any degree of control over the flat and so would not occupy it for the purposes of ground (g).
The appeal
The High Court could find no basis for interfering with the judge’s evaluation of the evidence on either issue.
If Mellcraft’s sole director was occupying the flat for the purposes of transacting company business, this was capable of qualifying as business occupation of the flat by Mellcraft.
As for ground (g), a tenant is not normally able to claim that it is in business occupation of premises it has sublet: Graysim Holdings Ltd v P&O Property Holdings Ltd [1995] EGCS 182.
The judge was therefore entitled to reach his conclusion based on the appellant’s evidence that it intended to grant tenancies.
Louise Clark is a property law consultant and mediator
