Landlords who grant leases that are validly contracted out of the Landlord and Tenant Act 1954 are entitled to possession at the end of the term. Tenants with such leases have no security of tenure and must accept that their landlords may refuse to renew their tenancies through no fault of their own.
Trafford v Blackpool Borough Council [2014] EWHC 85 (Admin) serves as a cautionary tale for local authorities. The proceedings were triggered by the council’s refusal to renew a contracted-out lease to a law firm that occupied premises in an enterprise centre, which was not, and had never been, fully occupied. When the firm asked why, the council explained that it objected to the work that the firm had been undertaking, which had forced it to increase its insurance to unprecedented levels.
It seems that lawyers at the firm had represented a number of clients seeking compensation for personal injuries alleged to have been caused by the council’s negligence, predominantly in highways “tripping” cases. The firm sought to have the council’s decision judicially reviewed on the basis that the council had wrongfully exercised its statutory power, conferred by section of the 123 Local Government Act 1972, to dispose of land. The council argued that it had reached a private decision; it was not under any public duty to its tenant and could choose who occupied its leasehold properties.
The High Court reviewed the authorities and decided that there was a sufficient public law element or connection in this case to render the council’s decision susceptible to judicial review. The judge accepted that the council had a wide discretion under section 123 and that it was not bound to adhere solely to its tenancy selection criteria for the centre. It would have been perfectly proper for the council to consider the nature of the tenant’s business, and any financial benefit or harm to the wider community – and to itself – in addition to its policy regarding tenant mix at the centre, when considering whether to renew the tenancy.
However, local authorities must act in good faith when taking decisions on behalf of the public and should not allow such decisions to be founded on irrelevant or inappropriate considerations, or to advance an improper purpose. The council had failed to exercise its statutory powers for the purposes for which they were conferred in the context of section 123 and in the light of the fact that the enterprise centre was constructed and operated at the public expense for the public good.
The council had assumed that the tenant was a “claims farmer” and failed to give the tenant an opportunity to make any representations to it about that before reaching its decision. That was unfair and there was no rational basis for thinking that forcing the tenant to relocate would reduce the number of claims brought against the council. The council had chosen not to renew the lease to punish the law firm for its actions (even though the tenant was not doing anything unlawful or improper and the council knew that its decision would adversely affect the centre’s finances). The council had misused its statutory powers. Its decision was fundamentally tainted by illegality and would be quashed.
Allyson Colby is a property law consultant
