Landlord and Tenant Act 1954–Landlord’s opposition to new tenancy on ground of plans for substantial reconstruction requiring possession of holding–Clause in lease providing for entry for essential structural repairs only–Reliance by tenant on section 31A(1)(a)–Whether landlord required legal possession or whether agreement to grant access by tenant under section 31A(1)(a) sufficient–Held that tenant could not rely on this provision as the work would interfere to a substantial extent with the tenant’s use of holding–Landlord’s appeal allowed
This was an
appeal by Roger Charles Reeves, landlord of premises at 1 Cornhill, Dorchester,
from a decision of Deputy Judge A J C Sumption at Dorchester County Court on
October 7 1977 that the landlord failed in his opposition (on the ground of
section 30(1)(f) of the Landlord and Tenant Act 1954) to the grant of a new
tenancy under Part II of the Act to the tenant, Mrs Bridget Anne Redfern. The
landlord wished to carry out works of construction to the premises, and the
question was whether such works required ‘possession’ of the premises, and
whether the tenant, having undertaken to give the landlord access to the
holding for the purpose of carrying out the works, had the protection of
section 31A(1)(a) of the Act as inserted by section 7 of the Law of Property
Act 1969.
W
Stewart-Smith (instructed by Kingsley Smith & Co, of Gillingham, Dorset)
appeared on behalf of the landlord (appellant); C M Edwards (instructed by Creech,
Redfern & Co) represented the tenant (respondent).
Giving the
first judgment at the invitation of Stephenson LJ, LAWTON LJ said that the
effect of the judgment below was that the tenant was to have a new lease of the
ground floor and basement of 1 Cornhill; she was to have a new lease for seven
years and a starting rent of £1,800, to be increased to £2,800 when certain
works which the landlord intended to carry out had been completed. There was to
be a rent review clause in the new lease to deal with any increases in rent
after five years.
Since 1968 the
tenant had carried on business in the premises as a fashion shop. Her lease
started on June 12 1968 and her term of years expired on September 26 1977. The
fashion shop was situated, very conveniently for trading purposes, at the
corner of High Street and Cornhill. Next door was a jeweller’s shop which was
owned by the landlord. He had acquired the head lease of 1 Cornhill. In 1976 he
acquired the freehold, and was minded to move his jewellery business there from
the High Street. If he was to do that, substantial alterations would, for
various reasons related to security, be necessary.
In October
1976 the tenant applied, pursuant to section 24 of the Landlord and Tenant Act
1954, for a new lease of her holding at 1 Cornhill. On November 25 1976 the
landlord served a counter-notice, setting out various grounds for opposing the
renewal of the lease, one of them being based on section 30(1)(f) of the 1954
Act, namely, that the landlord intended to demolish or reconstruct the premises
or a substantial part of them, or carry out substantial construction work, and
that he could not reasonably do so without obtaining possession. On August 9
1977 the tenant amended her application to the effect that if she were granted
a new tenancy she would give the landlord access to the holding for the purpose
of carrying out work. She clearly had in mind section 31A(1)(a) of the 1954 Act
as inserted by section 7 of the Law of Property Act 1969.
It was clear
that some parts of the building were in bad structural condition. The lease
(clause 2(9)) empowered the landlord to enter the premises for essential
structural repairs, but not for the kind of works which he wanted to do for the
purpose of reconstructing the ground floor so as to make it more secure for the
purpose of a jewellery business. At the trial the main issue seemed to have
been whether the landlord was really genuine in his desire to reconstruct the
premises. The tenant submitted that he was making an excuse to get possession
at the end of the tenancy.
Evidence was
given before the trial judge that while the works were being done the tenant
could transfer her business from 1 Cornhill to nearby premises and could
thereby preserve the goodwill of her business. It was estimated, and the trial
judge seemed
and four months. The landlord submitted that while the works were being done he
would have to have possession of the premises, and his legal advisers had in
mind, because of a House of Lords decision (Heath v Drown [1973]
AC 498) and an earlier decision of this court, that possession meant lawful
possession and not mere physical occupation. The tenant contended that the
landlord would not require lawful possession, and that even if he did so
require lawful possession there would be no substantial interference with her
use of the premises, so that she was entitled to rely on section 31A(1)(a) of
the 1954 Act.
The foundation
of her argument was the difference between physical occupation under the lease
and lawful possession outside the lease. Her difficulty was that the proposed
new works included alterations which did not come within clause 2(9), and it
followed therefore that under the lease the landlord had no right to enter the
demised premises for the purpose of doing those new works. As long as the lease
subsisted the tenant could have refused entry for them.
In so far as
the landlord wanted to go into occupation in order to do the structural repairs,
it was clear that the landlord did not require lawful possession; but in so far
as he wanted to go into physical occupation for the purpose of doing the other
works, he required lawful possession. The difference between the two kinds of
occupation–physical possession under a lease, and lawful possession outside the
lease–was explained in the decision of the House of Lords in Heath v Drown
[1973] AC 498, where the reconstruction was alleged to be nothing more than
works permitted by the lease. Had the landlord in that case proposed to do
nothing more than the structural repairs, it, too, would have been outside the
rights given to him by section 30(1)(f); but there were additional works which
required to be done.
In the present
case it was manifest from the terms of the judgment below that the judge took
the view that the totality of the works would undoubtedly interfere for a
substantial time with the tenant’s use of the demised premises; but he held
that the landlord did not require possession of the premises in the legal
sense, and the fact that, in addition to the structural repairs, he intended to
carry out other work did not affect the position. The respondent had failed to
show, so the trial judge held, that he could not do the works without obtaining
possession. The trial judge did not appear to have taken into account the
substantial time which the new works would have taken. Although the landlord
had a right to do the structural work, he had no right, unless authorised, to
do the additional work. Once it was accepted that the landlord could not, under
the lease, go in to do the new works, the question had to be asked what right
he had to go in. He had a right only by the consent of the tenant. It followed
that this brought into operation section 31A(1)(a) of the 1954 Act.
Could ‘the
work’ (ie the new work) reasonably be done without obtaining possession of the
holding and without interfering to a substantial extent and for a substantial
time with the use of the holding for the purposes of the business carried on by
the tenant? It seemed that the trial
judge must have taken the view, though he did not say so in terms, that the new
works would interfere to a substantial extent and for a substantial period of time
over and above the works covered by clause 2(9) of the lease. Mr Stewart-Smith
said that if that were the right construction, the landlord had established
that he required lawful possession within section 30(1)(f) and was therefore
entitled to resist the grant of a new tenancy.
Mr Edwards said
this was not so. The whole object of section 31A(1)(a) was to safeguard the
tenant’s business. If, therefore, on the facts it could be shown that the
tenant’s business would be safeguarded notwithstanding having to give up
occupation of the premises while the proposed work was being done, she was
entitled to the protection given to her by the section. Mr Edwards argued,
rightly in his Lordship’s opinion, that section 31A(1)(a) was brought in by the
Law of Property Act 1969 to give tenants further protection, and on the
evidence the learned judge found that by transferring her business to nearby
premises temporarily the tenant would have been able to safeguard her business.
Mr Stewart-Smith on the other hand submitted that it did not come within
section 31A(1)(a) at all because the words were that the works, if they were to
be carried out, must be carried out ‘without interfering to a substantial
extent or for a substantial time with the use of the holding.’ Mr Stewart-Smith submitted that the court
must look to the physical effects of the work, and not to the consequences of
the work from a business point of view. He submitted that this must be so from
the use of the words ‘with the use of the holding.’
In his
Lordship’s judgment that submission was well founded, and as the learned judge
by necessary implication found that there would have been an interference to a
substantial extent and for a substantial time with the use of the holding
because of the new works, it followed that the tenant was not entitled to the
protection given by section 31A(1)(a). His Lordship would accordingly allow the
appeal.
Agreeing,
GEOFFREY LANE LJ said that the issues between the parties had become narrowed
down to the question whether the landlord had established that he could
reasonably have carried out the intended works of construction without
obtaining possession of the premises. From section 30(1)(f) it seemed to his
Lordship that to succeed the landlord must show that he required, for the
purposes of his works, possession of the premises, and possession in such a
form and to such an extent as would be incompatible with the tenancy on its
original terms; but, as was illustrated in Heath v Drown (supra),
where there was a clause in the original lease giving the landlord rights of
entry in order to do repairs sufficiently wide to cover the proposed works of
construction, the tenant was entitled to protection. It seemed likely that had
there been no such clause in Heath v Drown the landlord would
certainly have succeeded (see the speech of Lord Kilbrandon at p 516).
There was in
the present case no dispute that during the currency of the works it would in
practical terms be impossible for the tenant to carry on her business in the
premises. It followed that for a not inconsiderable period she would be out of
possession otherwise than by virtue of clause 2(9) of the lease. On those facts
it seemed to have been clearly established by the landlord that the grounds
under section 30(1)(f) did not assist the tenant. That cast one back on to the
provisions of the new section, section 31A(1)(a). In one sense of the word, the
landlord did obtain possession of the holding because the tenant had had,
temporarily at least, to move; but possession did not mean physical possession,
because if it did the landlord in Heath v Drown would no doubt
have succeeded.
The learned
judge in the present case seemed inferentially at least to have reached the
conclusion that the interference with the tenant’s use of the holding would be
substantial; but he appeared to be basing his decision upon interference with
the goodwill of the business, and not interference with the use of the holding
for the purpose of the business carried on by the tenant. If he had followed
the correct course and considered that latter aspect, inevitably he would have
come to the conclusion that the availability of the alternative nearby
accommodation should not affect his decision.
Also agreeing,
STEPHENSON LJ said that the learned judge was of opinion that the landlord did
not need to obtain possession under section 30(1)(f) in the legal sense in
order to carry out the repairs under clause 2(9), and that the works outside
the clause did not add enough to affect the position. If the latter was a
finding of fact, it was not justified, and if it was a holding of law, it was
wrong. The additional works could not reasonably be carried out without the
landlord putting an end to the tenant’s rights within the decision of the
majority of the House of Lords in Heath v Drown.
The appeal
was allowed with costs in the Court of Appeal. By consent, there was no order
in respect of the costs below. Leave to appeal to the House of Lords was
refused.
