Lease – Business premises – Renewal – Respondent landlord serving notice under section 25 of the Landlord and Tenant Act 1954 terminating business tenancy – Respondent intending to occupy – Respondent opposing application by appellant tenant for new tenancy pursuant to section 30(1)(g) of 1954 Act – County court dismissing claim for new tenancy on ground that respondent intended to occupy for own business purposes – Whether respondent precluded from relying on ground (g) as immediate, but not competent, landlord – Appeal allowed by a majority
The appellant held an underlease of part of business premises expiring on 14 July 2010, three days before the expiry of the headlease in respect of the whole property held by the appellant’s immediate landlord, the respondent. The permitted use of the property was the sale of frozen food and ancillary products. Just before the expiry of its underlease, the appellant served on the competent landlord under the headlease a request pursuant to section 26 of the Landlord and Tenant Act 1954 for a new lease. It then applied to the county court under section 24 for the grant of a new tenancy.
On 24 February 2010, the respondent was granted a new headlease for a term of 15 years from 18 July 2010 so that it became the appellant’s competent landlord as defined in section 44 of and Schedule 6 to the 1954 Act. The respondent then served a counter-notice on the appellant under section 26(6) of the 1954 Act, relying on section 30(1)(g) on the ground that it intended to carry on its business at the premises after the expiry of the underlease.
However, between 17 May 2009 and 24 February 2010, the respondent had been the appellant’s immediate landlord but was not the competent landlord as defined in section 44. Thus the appellant argued that the respondent could not rely on ground (g) since, under the five-year rule set out in section 30(2) of the 1954 Act, a landlord was barred from relying on section 30(1)(g) unless he had acquired the relevant interest more than five years before the end of the tenancy. Accordingly, the temporary interruption of the respondent’s status as competent landlord made it impossible to aggregate the respondent’s successive interests for purposes of the five-year rule.
The county court held that the appellant was not entitled to a new tenancy since the respondent had a genuine intention to operate a retail business on the premises and was not precluded from relying on ground (g) under the five-year rule. The appellant appealed.
Held: The appeal was allowed by a majority (Rimer LJ dissenting).
The mischief against which section 30(2) was directed was that of a new landlord who came onto the scene towards the end of a lease and then asserted a right to occupy the demised premises for his own purposes. The mischief against which section 44 (1) was directed was that of a landlord whose interest in the property was soon to expire, but who nevertheless sought to assert substantive statutory rights against the tenant. A landlord who was otherwise entitled to rely upon ground (g) was not precluded from doing so by section 30(2) if the interest of an inferior landlord, who was not a competent landlord, was merged into the inferior landlord’s interest during the relevant five year period. If the competent landlord had held a series of leasehold interests, or possibly freehold and leasehold interests, those interests were aggregated for the purpose of seeing whether the five year rule was satisfied: Diploma Laundry v Surrey Timber [1955] 2 QB 604, Bolton Engineering Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159 considered.
The problem in the present case concerned a landlord who had ceased to be the competent landlord for a number of months during the relevant five year period and the respondent was precluded from relying on ground (g) by the operation of section 30(2). Section 44 did not provide a mere mechanism. Its effect was that, for almost all purposes under Part II of the 1954 Act, someone who was not the competent landlord was not the landlord at all. Section 44 stated that the word “landlord” meant competent landlord as defined in s 44(1). Therefore, the word “landlord” had to have the same meaning in each of the three places where it occurred in section 30(2) for the purpose of considering whether the landlord was or was not on a particular date entitled to oppose, on ground (g), the appellant’s request for a new tenancy: Artemiou v Procopiou [1966] 1 QB 878 and VCS Car Park Management Ltd v Regional Railways North East Ltd [2000] 1 EGLR 57; [2000] 05 EG 145 distinguished.
In the present case, the respondent had not been the landlord at all, for the purposes of section 30(2), between 17 May 2009 and 24 February 2010. Thus it did not possess any “interest of the landlord” between those two dates. It followed that, when a new lease was granted to the respondent on 24 February 2010, the respondent became, for the first time since 17 May 2009, a competent landlord. Thus, the “interest of the landlord” was created on that date. In all the circumstances, the nine month break in the respondent’s status as competent landlord was fatal to its case and the respondent was not entitled to oppose the appellant’s application for a tenancy on ground (g).
Stephen Jourdan QC (instructed by EMW) appeared for the appellant; Edward Cole (instructed by Andrew Jackson Solicitors) appeared for the respondent.
Eileen O’Grady, barrister