Allyson Colby considers the first ground (f) decision following the Supreme Court’s Franses ruling.
Key points
- A landlord had passed the stringent “unconditionality” test laid down in Franses, even though it had subtracted work from, and then added it back to, the project
- The judge was persuaded by longstanding evidence of the landlord’s intentions and by its contractual commitment to the work
The Landlord and Tenant Act 1954 enables tenants to renew business tenancies. However, landlords are entitled to recover possession on any of the grounds set out in section 30(1). Where ground (f) applies, a landlord must show that it intends to demolish or reconstruct the premises or a substantial part of them on the termination of the current tenancy, and that it cannot reasonably do so without recovering possession.
The landlord’s intention must be firm, settled and – thanks to the Supreme Court decision in S Franses Ltd v Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4 – unconditional. In other words, its intention must not be dependent on whether the tenant chooses to pursue a claim for a new tenancy, or to vacate. The acid test is whether the landlord would intend to carry out the same work if the tenant were to leave voluntarily. (See Ground (f): Paved with impermissible intentions, p57, EG 12 January 2019.)
Proposed redevelopment
London Kendal Street No 3 Ltd v Daejan Investments Ltd [2019] PLSCS 166 is the first decided case on the quality of a landlord’s intention in the post-Franses era. The premises at the centre of the dispute were situated in Park West, a large mansion block in Marble Arch containing a vast double-height basement, commercial space, and hundreds of residential apartments.
The premises were situated on the ground floor of the building. They comprised a meeting room, kitchen, shower room and toilets, which were let to the tenant, a high-class serviced office provider, for use in conjunction with offices that it occupied under separate, but longer, leases. When the facilities lease expired, the landlord sought possession of the premises in order to construct an entrance to the building from the main road (which the property lacked), together with a lobby containing a new lift and a staircase into the basement.
The landlord had already obtained planning permission for, and was contractually committed to, the work. It had a strong balance sheet and had given the court an undertaking to carry out the work. Even so, the tenant questioned whether the landlord could satisfy ground (f).
Changes of intention
The proposed work formed part of a much bigger and longstanding project to remove damp and eradicate corrosion from steel columns in the basement, to preserve the integrity of the building and put the basement into a lettable condition. The work began in 2017, but stopped when the tenant threatened to seek an injunction because the noise from the basement was intolerable.
So the landlord decided to focus only on the work that would become possible when the facilities lease expired. But the subsequent decision in Franses, which post-dated the issue of proceedings in this case, enabled the tenant to suggest that the landlord had realised that it would be unable to show that it intended to pursue the original project, because the parties had reached an impasse, and had changed the scope of the work to satisfy ground (f). Consequently, the quality of the landlord’s intention failed the stringent test of “unconditionality” laid down in Franses.
This compelled the landlord to revert to the original project, causing the tenant to renew its threat to seek an injunction to prevent the landlord from interfering with its use and enjoyment of the offices. It claimed that weekend working was not an option because it would infringe the residential tenants’ rights. So there was a high risk that the landlord would be unable to carry out any work at all or, alternatively, to begin work quickly enough to satisfy the requirement in ground (f) to carry out the work “on the termination of the current tenancy”.
Quality of intention
On balance, the county court decided that the landlord’s intention did pass the Franses test, even though it had uncoupled, and then recoupled, work. The judge was persuaded by evidence of the landlord’s intentions dating back to the grant of the facilities lease (which was shorter than the office leases to enable the landlord to obtain access to the basement, if required), by documents showing what the landlord had in mind long before it served its section 25 notice, and by the landlord’s ongoing contractual commitment to the work.
The tenant criticised the wording of the landlord’s undertaking to carry out the work, which it had qualified due to the possibility that it might be subjected to an injunction prohibiting or inhibiting the work.
But the judge took the view that this was reasonable in the circumstances of this case. And, if the tenant were to obtain an injunction, the judge doubted that it would be expressed in absolute terms. The court would be reluctant to prevent the landlord from undertaking the work required to resolve the problems in the basement, and could be expected to impose terms to limit potential disruption, thereby protecting and preserving the rights of both parties.
Timeframe
Section 64 of the 1954 Act provides that a tenancy will terminate three months and 21 days after the court passes judgment. But this does not mean that the landlord must be standing by with a wrecking ball on the day that the tenant moves out; the court will allow a landlord a reasonable time to commence work.
The judge decided that the landlord should be allowed six months and 21 days to commence work in this case. The landlord was paying its building contractor to keep the building contract alive and had contracted for a lead-in time of eight weeks.
Consequently, the judge considered that the landlord would have ample time to start work, even if it were to be delayed.
See also: View from the Bar: 1954 Act tactics, post-Franses
Allyson Colby is a property law consultant
