On 1 April this year, we wrote about the decision that had just been handed down in B&M Retail Ltd v HSBC Bank Pension Trust (UK) Ltd [2023] EWHC 2495 (Ch); [2023] PLSCS 169, an uncontested business tenancy renewal.
The main issue in the hearing, which lasted for three days, was whether the expert planning evidence led by the parties justified the inclusion of a redevelopment break clause in the new tenancy of a lease of premises on a retail park in Willesden, and if so when that break clause should be operable.
HSBC’s evidence, which the judge accepted, was that it would have opposed any section 26 request served by B&M, and only failed to do so because of a mishap in its post room during the Covid lockdown period.
Had it been otherwise, then HSBC would have opposed the grant of a new tenancy on the ground set out in paragraph (f) of section 30(1) of the Landlord and Tenant Act 1954, and aimed for termination proceedings in which to prove its case, with an eye to an early possession date.
As it was, HSBC was confined to an uncontested renewal, in which its aim was to re-enable its redevelopment plans by having included in the new tenancy a redevelopment break clause, operable at the first conceivable moment.
The judge at first instance accepted HSBC’s argument that, in carrying out its balancing exercise between the parties, the court will only upset a landlord’s redevelopment ambitions if there is a major factor which points the other way; and that the court should reject any terms which would either prevent redevelopment or delay it unduly.
He accordingly ordered that the new tenancy should contain a rolling break clause, operable immediately by six months’ notice. In so doing, the judge was doing little more than restating the law established by a number of decisions of the Court of Appeal, and applying that law to the facts before him, which included the fact that the landlord might lose its development partner in the event of a prolonged delay, and would or might have to grant extra rent-free periods.
What happened next
Had matters rested there, the current tenancy would have terminated three months and three weeks after the order (being the period mandated by section 64 of the 1954 Act) – say the end of July 2024; HSBC could then have served a break clause notice and a section 25 notice, allowing it to commence termination proceedings by the end of January 2025; and the stage would have been set for a contested tenancy termination claim, which would have been heard by the court by (OK, we’re being optimistic here) the end of 2025. Judgment might take a month from the hearing, and then there would be another three months and three weeks to wait until the new tenancy terminated, assuming no further appeals.
But matters in B&M did not end with the judgment at first instance – because the tenant obtained permission to appeal from Leech J, who commented that B&M had “a real prospect of persuading the Appeal Court that the judge misdirected himself as a matter of law and that this affected the terms of the new lease which the judge ordered.”
The appeal itself was heard by Miles J earlier this month on 4 October. In his judgment, delivered with commendable alacrity the following day, the judge dismissed the appeal. He accepted that some of the judge’s comments in the court below might have been better expressed, while adding that experience shows most judgments could be improved.
Ultimately, however, he considered that the judge had carried out a comprehensive review of all the relevant factors and had appropriately balanced B&M’s interests in security of tenure against the competing interests of HSBC in obtaining vacant possession and redeveloping as soon as possible.
In the result, just as the judge had done at first instance, Miles J ordered the grant of a new tenancy containing a redevelopment break clause, operable immediately. But this was not, of course, at no loss to HSBC, because even though the judge moved with despatch, the overall result of the appeal has been to add a seven-month delay to the renewal proceedings.
Spinning things out
Where the tenant is trading profitably from its premises, it is of course in its interests to (let us say) exploit the procedural complexities of the 1954 Act to ensure it can stay in the premises for as long as possible – three years in the case of B&M, even though its premises were (as the judge held) old and tired.
Changing the context, another well-trading tenant was able to spin out the procedure for an even longer four and a half years in TFS Stores Ltd v Designer Retail Outlet Centres and others [2021] EWCA Civ 688; [2021] EGLR 30 before the Supreme Court finally put an end to its hopes of eternal profit.
Although in each case the landlords ultimately prevailed, these decisions act as warnings of the hurdles that a resourceful tenant may be able to erect in an attempt to delay either a redevelopment of its premises (as in B&M), or a termination of its tenancy (TFS).
To these considerations should, of course, be added the observation that grounds of opposition to the grant of a new business tenancy can be difficult for a landlord to establish (see S Franses Ltd v Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4 in relation to grounds (f) and (g); and Gill (as Trustee of Gillcrest UK Pension Scheme) v Lees News Ltd [2023] EWCA Civ 1178; [2023] PLSCS 171 in relation to grounds (a), (b) and (c)).
Those advising parties to 1954 Act renewal proceedings therefore need not merely to be on top of the law, but must also be tactically astute.
Guy Fetherstonhaugh KC and Julia Petrenko acted on behalf of HSBC in B&M, instructed by Andrew Myers and Kathryn Lister of Stephenson Harwood LLP
