Landlord and tenant – Business tenancy – Landlord and Tenant Act 1954 – Respondent tenant serving notice under section 26 of 1954 Act requesting new business tenancies – Appellant landlord opposing renewal of leases – County court granting new tenancy – Appellant appealing – Material time at which court to assess state of repair of premises – Whether respondent “ought not” to be granted new tenancy pursuant to section 30(1) – Appeal dismissed
The respondent was the tenant under two business leases of premises in London W10. The appellant was the landlord, in his capacity as trustee of the Gilchrest UK Pension Scheme. Part II of the Landlord and Tenant Act 1954 applied to both leases.
On 31 August 2018, the respondent served notices on the appellant under section 26 of the 1954 Act, requesting new tenancies. The appellant served counter-notices opposing the renewal of both leases under section 30(1)(a), (b), and (c) based on breach of repair and maintenance obligations, persistent delay in paying rent, other substantial breaches and intention to demolish or reconstruct. On each ground, the court had to decide whether the respondent “ought not” to be granted a new tenancy in view of the default or behaviour.
The county court found that, when the counter-notices were served, the premises were in substantial disrepair as a result of the respondent’s breach of its repairing covenant and the respondent had persistently delayed in paying rent. But the judge went on to decide that the substantial disrepair had been remedied by the date of the hearing; and that the delay in payment of rent was minor and would not recur. There were other breaches of covenant, but they, too, were minor. Accordingly, he decided that the appellant had not established that the tenant ought not to be granted a new tenancy and ordered new tenancies to be granted.
The appellant’s appeal was dismissed by the High Court: [2023] EWHC 403 (Ch). The appellant appealed.
Held: The appeal was dismissed.
(1) There was nothing in either the case law, or the words of section 30(1)(a), that confined the court to considering only the state of repair of the premises at the date of the hearing, without regard to the tenant’s past behaviour. Further, if the court was invited to consider whether there “has been persistent delay in payment of rent” (ground (b)), it was plainly entitled to survey the whole course of the current tenancy in deciding whether any delay had been “persistent”.
Likewise, if the court was invited to consider whether there had been substantial breaches of covenant, or the tenant’s use or management of the holding (ground (c)), it would look back at the tenant’s overall performance: Lyons v Central Commercial Properties London Ltd [1958] 1 WLR 869; (1958) 172 EG 111, Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1957] Ch 67; [1959] AC 20 and Hazel v Akhtar [2001] EWCA Civ 1883; [2002] 1 EGLR 45 considered.
What had happened between the date of the notice (or counter-notice) and the date of the hearing was plainly relevant; to that extent, the tenant had a clear incentive to remedy any breaches of the repairing obligations by the date of the hearing. But if the tenant had a lamentable record of performance and only put things right at the last minute, the court could legitimately take that into account: Betty’s café, Eichner v Midland Bank Executor and Trustee Co Ltd [1970] 1 WLR 1120, Hutchinson v Lamberth [1984] 1 EGLR 75, Cadogan v McGirk [1996] 2 EGLR 75, Youssefi v Musselwhite [2014] 2 P&CR 14; [2014] 3 EGLR 22; [2014] EGILR 42, Hazel and Horne & Meredith Properties v Cox [2014] 2 EGLR 175; [2014] EGILR 64 considered.
(2) The overall question in deciding whether the tenant “ought not” to be granted a new tenancy was whether it was fair to the landlord to require him to enter into a new legal relationship with the tenant, bearing in mind that Part II of the 1954 Act was an interference with freedom of contract to protect the business interests of the tenant so far as they were affected by the approaching termination of the current lease, in particular as regards his security of tenure: O’May v City of London Real Property Co Ltd [1983] 2 AC 726 considered.
As a matter of principle, the relationship of landlord and tenant was a unitary contractual relationship, and a compartmentalised approach to sections 30(1)(a), (b) and (c) could have unjust results and should no longer be followed. A tenant could breach covenants falling under each of sections 30(1)(a), (b) and (c) which, if viewed separately, might not mean that he should be denied a new tenancy. But if taken collectively, the totality of the breaches by the tenant could be of such significance as to make it obviously unfair to compel the landlord to re-enter into legal relations: Youssefi considered.
There was also no obvious policy reason why, under section 30(1)(c), the court could take into account reasons relating to the use and management of the holding that did not amount to a breach of covenant but would be prohibited from taking into account conduct that amounted to a breach of the tenant’s most significant obligations to keep the property in good repair and to pay rent.
The separate delineation of breaches in subsections (a) and (b) simply set out explicitly the most important covenants likely to breached by a tenant: Kent v Guest [2021] EWHC 51 (Ch); [2021] EGLR 10 followed.
(3) It was clear that the judge appreciated that the overall question was whether it was fair to the landlord to require him to re-enter into a legal relationship with the tenant having regard to the tenant’s past behaviour. In posing the question in that way he was not confining himself to considering only breaches of the tenant’s repairing obligations. He was correctly treating it as an overall question: Horne considered.
In answering the “ought not” question, the judge was entitled to take into account matters relating to this landlord and this tenant. He was not considering the question by reference to some hypothetical landlord and tenant. The trial judge was, therefore, entitled to take into account his assessment of the appellant as a “hands-off” commercial landlord.
The judge’s decision was one to which he was entitled to come; and with which an appeal court could not or should not interfere.
Nicholas Grundy KC (instructed by (instructed by Lawcomm Solicitors) appeared for the appellant; Joanne Wicks KC and Ben Walker Nolan (instructed by David Cooper & Co) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Gill (as Trustee of Gillcrest UK Pension Scheme) v Lees News Ltd
