Landlord and Tenant – Business tenancy – Renewal – Grounds of opposition – Claimant applying for new business tenancy under section 24 of Landlord and Tenant Act 1954 – Defendant landlord opposing application under section 30(1)(f) relying on intention to demolish or reconstruct premises – Preliminary issue arising whether defendant satisfied ground (f) – Whether defendant having requisite subjective intention considered objectively – Judgment in favour of defendant
The claimant was the current occupier of Suite C2, Ground Floor, Park West, Marble Arch, Edgware Road, London under a lease made between the defendant as landlord and the claimant as tenant. The lease was granted for a period of five years from and including the 25 March 2013. The contractual term of the lease expired on the 24 March 2018.
On 25 March 2017, the defendant served on the claimant a notice pursuant to section 25 of the 1954 Act which specified 24 March 2018 as the date of the termination of the lease. It also stated that the defendant would oppose any application to the court for the grant of a new tenancy pursuant to ground (f), namely, that on the termination of the lease, the defendant intended to demolish or reconstruct Suite C2 (or a substantial part of it) and could not reasonably do so without obtaining vacant possession.
The claimant applied for a new tenancy pursuant to section 24 of the Landlord and Tenant Act 1954. The defendant opposed the grant of a new tenancy on ground (f) of section 30(1) of the 1954 Act (ground (f)). The tenancy continued in existence pursuant to section 24 of the 1954 Act following the claimant’s application for a new tenancy.
During the course of the renewal proceedings, the parties agreed that the question of whether the defendant satisfied ground (f) should be tried as a preliminary issue and an order was made in those terms.
Held: Judgment was given in favour of the defendant.
(1) It was common ground between the parties that the proposed works were sufficiently substantial and could not reasonably be undertaken without obtaining possession of Suite C2. The issue was whether the defendant had the current intention to do that at the termination of the tenancy. That had to be determined by considering: (i) whether the landlord had the requisite subjective intention; (ii) whether that assessment could be made by looking at it objectively; and (iii) whether the requirement of intention was made out on the hypothetical basis set out by the Supreme Court in S Franses Ltd v Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4. A consideration of the objective element assisted in establishing the true subjective intention of the landlord. If there was some obvious impediment to the landlord’s plans rendering them fanciful, that was a powerful indication that the landlord did not intend to do what he said he was going to do.
(2) Section 25 provided a mechanism by which a protected business lease under the 1954 Act could be brought to an end. That was dealt with by service of a notice by the landlord upon the tenant under section 25 not more than 12 nor less than six months before the expiry of the lease. That notice had to communicate to the tenant if any ground of opposition was being put forward to resist any new tenancy. Although the lease technically came to an end, as soon as the tenant made an application for a new lease before the expiry date, the lease would continue on a statutory basis until the matter was determined by agreement or by the court (section 64 of the 1954 Act). The date upon which any such intention was to be assessed was the date of the trial of the preliminary issue. There was nothing in the legislation which required a landlord to finish in any particular timeframe. Adopting a common-sense approach, an appropriate timeframe in this case would be about six months and 21 days from the date of the judgment: Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 followed.
(3) The effect of the decision in S Franses Ltd was that the landlord’s ability to oppose lease renewals had been significantly lessened. A landlord now had to demonstrate, in addition to the subjective and objective elements, that its intention to undertake works was held independent of the tenant’s right to a new tenancy. The Supreme Court held that whilst motive in and of itself remained irrelevant to ground (f), it could be useful evidence of the landlord’s underlying intention. The landlord’s intention to demolish or reconstruct the premises had to exist independently of the tenant’s claim to a new tenancy. Accordingly, the landlord’s intention to carry out the works could not be conditional upon whether the tenant chose to seek a new tenancy. The test was whether the landlord would intend to do the works if the tenant left voluntarily. If not, the landlord’s intention was conditional and therefore could not achieve the fixed and settled intention that ground (f) required.
(4) On the facts of this case, the question was whether the landlord’s real motive in doing the works was simply to remove the tenant as distinct from some ordinary commercial reason. The issue of purpose or motive in resolving the genuineness of any intention was a factor which could be considered when the court was deciding intention. It was significant that the claimant did not dispute that the defendant intended to carry out the works. In looking at that subjective intention objectively, it was important to note that even in the relatively early stages of negotiations, there were documents which showed that there were discussions, on the part of the defendant, about whether there should be a break clause in the lease entered into with the claimant. That was indicative of the fact that, at an early stage, and at the very least, suite C2 was going to be dealt with in a different way to the other leases which were granted. The defendant had no difficulty in funding the works; the contracts were in place; there were no difficulties with planning; and the timescales for commencement were realistic. There was evidence of a subsisting intention for some time and the intention set out in Franses was made out. On balance, on the preliminary issue, the defendant had the requisite intention to carry out the works.
Caroline Shea QC (instructed by Mishcon De Reya) appeared for the claimant; Nathaniel Duckworth (instructed by David Conway and Co) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of London Kendal Street No 3 Ltd v Daejan Investments Ltd
