Landlord’s intention to demolish must exist independently of new tenancy claim

The owners of the Franses Gallery have won an important case on the application of ground (f) of the Landlord and Tenant Act 1954, securing for themselves the right to a new business lease. The dispute went to the very heart of the protection provided by the Act – raising the question of whether a tenant’s statutory right to a new tenancy can be circumvented by works proposed by the landlord, which would not have been contemplated had the tenant been prepared to leave voluntarily. In S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62, the landlord admitted that it had worked up a scheme to satisfy ground (f) and that there would have been no need to undertake the work if the tenant, who carried on a business specialising in antique tapestries and textile art, had been willing to vacate at the end of its lease. But the tenant had spent substantial sums on the premises, which were situated on the ground floor and basement of the Cavendish Hotel and were located in the heart of a district known for its art galleries. And the tenant wanted to stay. The work that the landlord was proposing was, to all intents and purposes, commercially and practically useless. But it gave the court a written undertaking that it would carry out the work when the lease ended. So the tenant’s application for a new business lease was dismissed. In a subsequent leapfrog appeal, the Supreme Court accepted that the landlord’s motives for undertaking work are irrelevant. However, section 30(1)(f) of the Act assumes that the landlord’s intention to demolish or reconstruct premises is being obstructed by the tenant’s occupation. Hence the requirement that the landlord “could not reasonably do so without obtaining possession of the holding” and the provision in section 31A that the requirement will not be satisfied if the work can reasonably be carried out by exercising a right of entry and the tenant is willing to include a right of entry for that purpose in the terms of the new tenancy. The court considered that these provisions demonstrate that a landlord’s intention to demolish or reconstruct premises must exist independently of the tenant’s claim to a new tenancy, so that the tenant’s right of occupation under a new lease would obstruct the work. In this case, the landlord’s intentions were “conditional”, in the sense that the work would be done solely in order to obtain possession of the premises. Therefore, the landlord did not “intend”, within the meaning of section 30(1)(f), to carry out the works relied upon in opposition to the tenant’s application for a new tenancy. Their Lordships added that the same acid test must be applied if a landlord has to add work to works already intended, simply in order to obtain possession – if, for example, the work originally planned would be insufficiently substantial or disruptive to warrant the refusal of a new tenancy. In such cases, the tenant’s claim to a new tenancy will normally fall to be resolved by reference only to the work that the landlord had “unconditionally” intended, even though – as the court accepted – this may give rise to factual questions of some nicety, incapable of resolution by proffering a simple undertaking to the court, as happens at present.   Allyson Colby, property law consultant