When a landlord opposes the renewal of a business tenancy on the ground that it intends to redevelop the property, it must satisfy the court that it has a fixed and settled intention to redevelop as well as a reasonable prospect of being able to do so. The landlord does not “intend” to redevelop if it has too many hurdles to overcome or too little control of events.
In terms of timing, the House of Lords’ decision in Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 established that the landlord must prove its intentions when the case is heard. However, in Hough v Greathall Ltd [2015] EWCA Civ 23; [2015] PLSCS 28, a tenant seized on linguistic changes made by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 to suggest that Parliament had changed the law.
The case turned on the meaning of section 25(6) of the 1954 Act. This used to provide that “a notice under this section shall not have effect unless it states whether the landlord would oppose an application to the court …. for the grant of a new tenancy”. However, as a result of changes made by the 2003 Order, the section now says that “a notice under this section shall not have effect unless it states whether the landlord is opposed to the grant of a new tenancy”.
The tenant argued that the substitution of the words “is opposed” for “would oppose” means that a landlord must prove its intentions at the date of the service of its section 25 notice. It claimed that this would protect tenants because it would enable them to test the landlord’s true intentions prior to the inception of proceedings. However, the Court of Appeal disagreed. It decided that Parliament had made the linguistic change as a consequence of the abolition of the tenant’s counter-notice.
Before the 2003 Order, tenants were required to respond to a section 25 notice with a counter-notice stating their own intentions. If they failed to serve a counter-notice within two months, stating that they were not willing to give up possession, they lost the right to renew. This proved to be a procedural trap for the unwary and was thought to serve little useful purpose. Consequently, the requirement was abolished when the 2003 Order came into force on 1 June 2004.
Lord Justice McCombe explained that the old subsection (6) had used the conditional tense (“would oppose“) because the landlord used to have to wait and see whether the tenant would serve a counter-notice stating its unwillingness to give up possession. However, the abolition of the counter-notice made it unnecessary to use the conditional tense.
There was no other purpose behind the amendment and nothing to indicate that Parliament had intended to change the law as to when landlords must prove their intentions. Indeed, the material published by the Law Commission and the Government at the time made extensive reference to the abolition of the counter-notice, but said nothing to suggest that the date for establishing a landlord’s intentions was to change.
The decision ensures that the requirements in the 1954 Act as to when landlords must prove their intentions remain identical for the purposes of both sections 25 and 26 (which applies where a landlord opposes a tenant’s request for a new tenancy).
Allyson Colby is a property law consultant
