Lease renewal: intention to redevelop trumps security of tenure

The Landlord and Tenant Act 1954 is not intended to prevent a landlord’s redevelopment ambitions unless there is a major factor which points the other way. In B&M Retail Ltd v HSBC Bank Pension Trust (UK) Ltd, Central London County Court Claim No H01CL583, the court granted a short-term and an immediate redevelopment break clause in a new lease of business premises under the 1954 Act. The case concerned premises on a retail park in Willesden, north London, owned by the defendant landlord from which the claimant tenant traded successfully as a retail store with attached garden centre. The contractual term of the lease of the premises expired in December 2020. The landlord intended to bring the tenancy to an end on the redevelopment ground but owing to an oversight during the Covid-19 pandemic failed to respond to the tenant’s section 26 request for a new tenancy served months earlier. Consequently, the landlord was bound to agree a new tenancy. The parties were able to agree much of the new lease, including the rent, but could not agree the length of the term and whether the tenancy should contain a rolling redevelopment break clause. In February 2021 the landlord had entered an agreement for lease with Aldi whereby Aldi would be granted a 20-year lease conditional upon obtaining planning and vacant possession of the premises by 3 February 2025. Aldi was required to undertake extensive “landlord’s works”, which included demolishing part of the existing building, renewing and replacing the external envelope, extending it to the rear and creating two separate retail units. An application for planning permission for the works had not been determined by the date of hearing and the planning experts disagreed about its likely outcome. The question for the court was whether there was a real prospect of the application succeeding. The court preferred the landlord’s expert evidence, that the proposal was for a reconfiguration of the premises and likely to succeed, to the view of the tenant’s expert, that it was a development which would be defeated by various planning policies. The authorities confirm that the 1954 Act is not intended to give security of tenure to a business tenant at the expense of preventing development and to delay the operation of the break clause would prejudice the landlord more than the tenant. The court ordered a five-year term with a redevelopment break clause operable immediately on six months’ notice. Louise Clark is a property law consultant and mediator