by Delyth Williams
In many cases, the attention of the practitioner is drawn to the question of whether a landlord can satisfy the necessary conditions for opposing the tenant’s request for a new tenancy of business premises under the 1954 Act. This article concentrates on two grounds of opposition which have not been the subject of analysis in recent years, namely the ground of persistent delay in paying rent (section 30(1)(b)) and substantial breaches of other obligations (section 30(1)(c)).
Persistent delay in paying rent
Section 30(1)(b) provides that “… the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due …”. There is, therefore, a discretion vested in the court of whether to allow the landlord’s claim to oppose the tenant’s application for a new tenancy.
In Horowitz v Ferrand [6] CLY 4843 (county court decision), the tenant occupied a room behind a shop and, for many years, carried on a business as a hairdresser. He had several fixed-term tenancies but then became a weekly tenant. At one time the tenant became heavily in arrears with payment of rent, though the deficit was eliminated in subsequent years. When the weekly tenancy began, he was issued with a rent book which was marked as showing a perfect rent record although there had, in fact, been irregular payments and the landlord had normally to call for the rent or send for it. There were never any legal proceedings instituted as a result of the delays in payment and the landlord did not have to incur any expense. The landlord served a section 25 notice which relied on ground 30(1)(b).
The county court judge held that, for the landlord to succeed in opposing the tenant’s application for the grant of a new tenancy under section 30(1)(b), the rent need not be substantially in arrear, nor need the arrears last for a long time. A landlord was not expected to be subjected to the work and irritation of pursuing a tenant for his rent. The tenant’s application therefore failed. Further, the county court judge was of the opinion that, if he had been inclined to hold that the landlord should not succeed in opposing the grant of a tenancy, then the new tenancy in this case would have been for no longer than six months.
The court can have regard to a course of conduct over a time span amounting to persistent delay, but this time span need not necessarily be for a long period. The court can also have regard to the effect which the granting of a new tenancy would have. In Hopcutt v Carver (1969) 209 EG 1069, up to the time when the tenant realised that the landlord might not be willing to grant him a new tenancy, there had been persistent delays in paying. Rent was due monthly in arrear and, at one stage, five months’ arrears had accumulated. Sachs LJ posed the question of what would happen after a new tenancy had been granted. The learned judge noted that no offer was made for payment of rent in advance in future and that no security was offered for such. In the circumstances, the Court of Appeal concluded that there was no ground for interfering with the county court judge’s decision to refuse the tenant’s application for a new lease.
The question of what amounted to persistent delay in paying rent was one of the issues considered in Hutchinson v Lamberth (1983) 270 EG 545, where a lease of a basement discotheque was granted by L to H and, on the expiration of the said lease, L served a section 25 notice relying on grounds (b) and (c) of section 30(1). At a later stage he purported to amend ground (c) by adding a complaint that H had caused a nuisance by excessive noise. The county court judge held that persistent delay in paying rent had been established where there was a period of four years in which no rent was paid, the position having been corrected only after commencement of legal proceedings. With regard to the second ground, the judge decided to admit evidence in relation to the alleged nuisance and then decided to dismiss the application for a new tenancy. H appealed to the Court of Appeal complaining that the trial judge should not have entertained evidence relating to the issue of nuisance because a landlord is not permitted to alter the grounds of opposition specified in the section 25 notice.
The Court of Appeal held that, if the case had come before the court only on the ground of persistent delay in paying rent, it would have been open to the landlord to lead evidence of all collateral matters affecting the occupancy of the premises by the tenant. Such evidence would be relevant in that it would enable the judge to exercise the discretion whether to order a new tenancy or otherwise. As it could not be said that the evidence relating to nuisance was wrongly admitted the application for a new trial would be dismissed.
In Rawashdeh v Lane [8] 2 EGLR 109; [1988] 40 EG 109, the Court of Appeal considered whether the Registrar of Civil Appeals should have given leave to appeal out of time from the county court judge’s decision to dismiss the tenant’s application for a new tenancy. For present purposes, however, the evidence of persistent delay in paying rent, which was sufficient for the county court judge to dismiss the tenant’s claim for a new tenancy, amounted to the following, inter alia: (i) all but the first and last payments of rent had been late; (ii) two possession proceedings had been commenced; and (iii) four cheques in payment of rent that were not initially honoured.
In Hurstfell Ltd v Leicester Square Property Co Ltd [8] 2 EGLR 105; [1988] 37 EG 109, H Ltd acquired, by an assignment, the last five years of a lease, the reversion of which was vested in L Ltd. After two years, the tenant company changed the nature of its business from the manufacture of plastic toys to the manufacture of industrial plastic mouldings. The tenant then fell into arrears in making payments of rent: all payments due from Lady Day 1984 to Christmas Day 1986 were late, delays ranging from four to 19 weeks. On two occasions L Ltd commenced proceedings to recover the rent.
L Ltd served a section 25 notice early in 1987 and stated that the grant of a new tenancy would be opposed on the ground specified in section 30(1)(b). After service of the section 25 notice, H Ltd paid the rent promptly and applied to the court for a new tenancy. In exercise of the discretion conferred by the words “ought not” in section 30(1)(b), the county court judge concluded that it was unlikely that further arrears would occur and that the ground of opposition had not been established. The Court of Appeal was of the opinion that the county court judge was satisfied with the tenant’s explanation of the past failures and that there would be no recurrence. On the facts, it was not possible to say that there was not evidence on which the county court judge could reach the conclusion he did.
The decision in Hurstfell stresses the discretion vested in the judge at the county court stage and provides an example of the operation of this discretion. In this context, the comments of Birkett LJ in the Court of Appeal in Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [7] 1 All ER 1; (1958) 171 EG 319 are also worthy of note. In considering this discretion, Birkett LJ stated:
This is a paragraph which makes use of the words “ought not”. This would seem to leave some discretion in the court which hears the application to decide whether the application ought or ought not to be granted. In practice, the court would look at the history of the payments and make its decision; but, if the tenant had some very good reasons to explain delays and very good grounds for assuring the court that the like situation would never arise again, it seems difficult to say that the court could not listen to evidence to show how completely the situation had changed at the date of the hearing, from what it was at the date of the notice, and that the court was prevented from taking the evidence into account in considering whether the landlord had established to the satisfaction of the court that the court “ought not” to grant the application.
In this context, it is to be noted that, following the decision in Cairnplace Ltd v CBL (Property Investment) Co Ltd (1984) 269 EG 542, the court can require that the tenant have a surety to guarantee his obligations under the lease.
In some cases, the landlord’s adviser may be faced with an argument by the tenant that the landlord has somehow waived his rights to oppose the tenant’s application for a new tenancy because of a failure to object to the tenant’s arrears of rent. The complex nature of this subject was summarised in an article by Mark Pawlowski “Waiver of tenant’s breach of covenant” at (1985) 273 EG 364, but for present purposes regard can also be had to the decision in Freeman v Barclays Bank Ltd (1958) 171 EG 171. In this case, the Court of Appeal was unable to accept the tenant’s contention that the landlords had waived their rights to oppose an application for a new tenancy where they had not objected strongly to the tenant’s persistent arrears of rent during the section 24 continuation tenancy.
“Substantial breaches of other obligations”
A landlord may oppose a tenant’s application for a new tenancy on the ground that “the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the current tenancy, or for any other reason connected with the tenant’s use or management of the holding”: section 30(1)(c). In this context, it is clear that the whole of the tenant’s conduct in relation to his obligations under the tenancy may be considered.
In Eichner v Midland Bank Executor & Trustee Co Ltd (1970) 216 EG 169, the premises, comprising a house and associated outbuildings, were leased to E who entered into a covenant not to use them for business purposes, but the landlords agreed that he should have a right to use one of the buildings in connection with his work as a chemist. The tenant used the premises for the purposes of manufacturing plastic foam and also for a translation business. The landlords served a section 25 notice and stated that they would oppose the grant of a new tenancy on account of a breach of the repairing covenants, for breach of the covenant not to carry on a business, and for parting with possession without authority, since E had established a company for the purposes of marketing of the plastic foam.
The county court judge accepted that the repairing covenants had been complied with and that parting with possession was not serious in this case. The use of the property for unauthorised business purposes was, however, regarded as a substantial breach of covenant. In reaching a decision not to grant a further tenancy, the judge went on to take into account matters which had been adduced in evidence but which were not the subject of the notice served by the landlords. Thus he commented on the tenant’s rent record and then stated:
What I do consider very important is the relationship between the landlord and the tenant. This has been very unhappy for at least 11 years, and this is admitted by [the tenant]. This unhappy relationship has therefore existed since 1958. There is evidence of a great deal of litigation in the past — in 1958, 1959, 1961, 1965 and the present year … it must be considered very carefully whether it is fair to saddle the landlords with a tenant who is in constant litigation with them.
The Court of Appeal held that the judge was not confined to the breach committed by the tenant in setting up his business enterprises. It was open to him to look at all the circumstances in connection with the breach and to look at the conduct of the tenant as a whole in regard to his obligations under the tenancy. In cases involving section 30(1)(a), (b) or (c) the judge was not limited to the various grounds stated in the notice. Further, if the judge had limited himself to the one substantial breach of covenant he would have held that the tenant ought not to be granted a new tenancy.
In this context, the decision of the Court of Appeal in Orenstein v Donn (unreported but digested in Williams: Handbook of Business Tenancies Case 95) is of some interest. In this case, the appellant had, since 1969, been the tenant of premises which he used for his business as a tailor or dry-cleaner. The premises consisted of a ground-floor shop, a back addition and a garage together with the use of a toilet. In 1976 the landlord purchased the premises and occupied the first floor for residential purposes. During the currency of the lease, there had been a dispute as to the landlord’s liability to deal with a disrepair of the structure and the parties were not on good terms. On the tenant’s application for a new lease, the only questions before the court were as to the length and duration of the new term.
The Court of Appeal was of the opinion that, if the conflict between the landlord and the tenant is such that it is not a relationship which should continue longer than is really necessary, there is no reason why the court should not grant a somewhat shorter term rather than the longer term in the hope that the parties, if they cannot maintain a harmonious relationship, can sever that relationship. In the circumstances, a three-year term was granted and not the seven-year term contended for by the tenant.
The second limb of ground (c) is wider and allows the court to consider the tenant’s use or management of the holding. In Norton v Charles Deane Productions Ltd (1969) 214 EG 559, the demised premises consisted of four separate leasehold houses held at a low rent of £200 pa each. Each of the leases provided that the lessee should not do, or permit to be done, on the demised premises anything which might be a source of nuisance, damage, inconvenience or annoyance to the lessors or the owners or occupiers of any adjoining premises. One of the grounds on which the landlords sought forfeiture was that one of the tenants’ employees permitted the use of one of the rooms in the houses (which were used as a “youth hostel”) for habitual prostitution. On this point, Swanwick J was of the opinion that the knowledge of the employee of the tenants could not be imputed to the tenants. However, the learned judge was of the opinion that certain other allegations of breaches of the nuisance covenant had been made out but were not serious enough to justify forfeiture of the leases.
However, for present purposes, it is to be noted that the learned judge was of the opinion that, taken together, the circumstances were sufficient to influence the court against granting the tenants’ application for new leases. Among the other factors taken into account by the court were frequent visits by the police to the premises, noise in general and noise caused by late night revelry and occasional parties.
In Turner & Bell v Searles (Stanford le Hope) Ltd (1977) 244 EG 1023, S Ltd were the landlords of premises used for the purposes of a depot in connection with a coach transport business. The premises were occupied by T under an oral monthly tenancy for a number of years. The landlords served a section 25 notice in response to which T served a counternotice and applied for a new tenancy. The landlords stated in their notice that they would oppose an application to the court for a new tenancy on the ground stated in section 30(1)(c).
To substantiate the ground of opposition, the landlords relied upon the fact that the local planning authority had served an enforcement notice under the Town and Country Planning Act 1971 requiring the use of the property to cease. The tenant’s appeal against the enforcement notice failed, but no prosecution had been commenced by the local authority, largely because the authority used the services of the company on regular occasions in connection with schools’ transport. The tenants made it clear that, if they were granted a new lease, the unauthorised use of the land would continue. The Court of Appeal held that the court was bound to refuse a new tenancy on the ground that if one were ordered it would thereby be ordering the parties to enter into an illegal contract which the court could not enforce because the illegal purpose of the tenant was known to both parties. The construction to be placed upon section 30(1)(c) was not such as to limit the second part of the provision to the relationship subsisting between the landlord and the tenant. Adopting a more general construction. Bridge LJ said: “I cannot think of a clearer case for saying that there was an ‘other reason connected with the tenant’s use’ of the premises why he should not be granted a new tenancy than the reason that the premises are being used, and are intended to be used, for an unlawful purpose.”
The use of a room together with fishing rights in contravention of a covenant prohibiting business use led to a refusal to grant a new tenancy in Jones v Christy (1963) 107 SJ 374. In this case, the tenant held premises with fishing rights under a 21-year lease terminable at seven years. The lease contained a covenant not to use the premises for any purpose other than as a private residence. The tenant exploited the fishing rights and a room in the premises commercially. The landlords served notice to terminate the lease at the end of the seven years and the tenant applied to the court for a new tenancy of the premises. The landlords opposed the application under section 30(1)(c) of the Act, relying upon the tenant’s breaches of covenant. The Court of Appeal held that part of the demised premises was occupied for the purposes of a business so that the tenant was therefore in breach of covenant and ought not to be granted a new tenancy. Waiver or acquiescence by the landlords could not be inferred, since there was a continuing breach, and waiver in the past could not affect the future.
Finally, in Beard v Williams [6] 1 EGLR 148; (1986) 278 EG 1087, B was a weekly tenant of land owned by W which he used for the purpose of breeding or training of greyhounds. It was a term of this tenancy that B should not live on the land but, in breach of this term, he brought on to the land a decrepit van. This vehicle was subsequently removed following the grant of an injunction in the county court. B, however, moved the van and placed it on highway land at a point near to W’s retained land, claiming that it was necessary for him to live nearby in order to carry on his business. Although advised by the police that the van was parked illegally, no action was taken by any public authority to secure its removal.
W served a section 25 notice terminating the tenancy, in response to which B served a counternotice and applied for a new tenancy. To substantiate this ground of opposition. W alleged that there was nowhere available for B to live with such proximity to the land to enable the business to be carried on in a proper and efficient manner. It was claimed that this was sufficient to oppose a grant of a new tenancy as it fell within the scope of the latter part of section 30(1)(c).
The Court of Appeal held that, since the user of the land subject to the tenancy was not in itself illegal, there was no automatic bar to the grant of a further tenancy and, in respect, the decision in Turner & Bell v Searles (Stanford-le-Hope) Ltd (1977) 244 EG 1023 could be distinguished. Further, the precarious nature of the tenant’s living arrangements can constitute a reason why the tenant ought not to be granted a tenancy since, if the tenant was driven away from his existing place of abode, the business would rapidly deteriorate, with obvious risk of prejudice to the interest of the landlord. It was a matter for judicial discretion to decide whether the landlord’s interest would be prejudiced by the grant of a new tenancy where a matter falling within section 30(1)(c) had been established. In this case, however, the Court of Appeal was not seized of all the evidence concerning the alleged illegal parking of the van and hence the matter would be remitted to the county court judge to decide.
