Landlord and Tenant Act 1954 – New tenancy – Appellant requesting new tenancy of combined residential and business premises under section 26 of 1954 Act – Respondent landlord opposing request and seeking order under section 29 for termination of tenancy without grant of new tenancy – Whether such order properly made on grounds in section 3(1)(a) and (c) – Whether appellant in substantial breach of covenants in lease such that new tenancy ought not to be granted – Appeal allowed in part
The appellant was the tenant of premises in Winchester, comprising a dwelling-house, shop, and rear garden, under a lease originally granted in April 1994 for a term of 15 years and later continued under the provisions of Part II of the Landlord and Tenant Act 1954 relating to the protection of business tenancies. In March 2009, the appellant served notice on the respondent landlord, under section 26 of the 1954 Act, requesting a new tenancy to commence in January 2010 for a further 15-year term at an annual rent of £5,000.
The respondent served notice opposing the request and applied to the court for an order, under section 29(2), for the termination of the tenancy without the grant of a new tenancy. The judge held that such an order ought to be made on the grounds in section 30(1)(a) and (c) of the Act, concerning respectively: (a) the state of repair of the property resulting from the tenant’s failure to comply with her obligations regarding the repair and maintenance of the premises; and (c) other substantial breaches of her obligations under the tenancy or “any other reason connected with the tenant’s use or management of the holding”.
On ground (a), he found that uncontrolled creeper growth over the rear exterior wall of the property risked causing damage and made it impossible to examine the exterior to determine its state and condition and that, while not a breach of the appellant’s repairing covenants, it was a breach of the appellant’s implied obligation to use the premises in a tenant-like manner. In relation to ground (c), he held that there had been substantial breaches of the covenant requiring the appellant to give reasonable access to the landlord to examine the condition of the property, which demonstrated a long-standing intransigence on the part of the appellant which undermined the efficient working of the relationship between landlord and tenant. He also found that there were substantial breaches of the user covenant in the lease, requiring the appellant “to use the Premises for the purposes of any retail trade within Classes A1 and A3… and not… for any other purpose”, since the appellant was carrying on no retail business at the premises and had no intention of doing so. The appellant appealed.
Held: The appeal was allowed in part.
(1) Under section 30(1)(a), the court had to ask itself whether, in view of the state of the holding brought about by the tenant’s breach of her obligation to maintain and repair, the tenant “ought not to be granted” a new tenancy. That involved the court focusing exclusively on the state of repair and asking whether, looking forward to the hypothetical new term, the proper interests of the landlord would be prejudiced by continuing in a landlord/tenant relationship with that particular tenant; in other words, whether it would be unfair, having regard to the tenant’s past performance and behaviour in relation to her obligation to repair and maintain the holding, for her to be foisted on the landlord for a new term. To satisfy that test, the breach had to be substantial: John Kay Ltd v Kay [1952] 2 QB 258; (1952) 159 EG 239, Lyons v Central Commercial Properties Ltd [1958] 1 WLR 869; (1958) 172 EG 111, Eichner v Midland Bank Executor & Trustee Co Ltd [1970] 1 WLR 1120; (1970) 216 EG 169 and Beard v Williams [1986] 1 EGLR 148; (1986) 278 EG 1087 applied.
The unrestricted plant growth on the rear wall of the property was not a breach of the appellant’s express repairing covenant, since the appellant was liable only to repair the interior. That matter did not amount to a breach of the implied covenant to use the premises in a tenant-like manner in circumstances where the landlord was under an express obligation to keep the exterior in tenantable repair and condition. While the entire building and garden had been demised to the appellant, and it might have been her responsibility to keep down weeds in the garden and control the plants generally as part of routine maintenance, the removal of creeper from the building was not her responsibility. Even if that matter had amounted to a breach of covenant, any breach was not substantial since the cost of the necessary work was said to be only £350.
(2) In relation to ground (c), the judge had been entitled to find that the appellant had on numerous occasions thwarted attempts by the landlord, her agents and experts to gain access to the property for the purpose required by the lease, namely to examine the condition of the premises, and to conclude that this showed a long-standing intransigence on the part of the appellant. It was irrelevant, when considering whether the breaches of covenant were substantial, that the respondent had been unable to show any loss resulting from the refusal of access; moreover, she would have incurred such loss in the form of wasted surveyor’s fees for visits to the premises when they had been unable to obtain access. The judge had taken the view that it would be unfair to the respondent, and therefore prejudicial, to expect her to continue with the appellant as tenant in light of the latter’s persistent and wilful refusal to comply with the terms of her tenancy. He was entitled to find that a new tenancy ought not to be granted on ground (c) by virtue of the access breach alone.
(3) There was also a substantial breach of the user covenant in the lease. The covenant could not be construed as purely negative in nature, so as to prevent use other than for a retail business without imposing any positive obligation on the tenant to keep the shop open. On the proper construction of the user clause, it imposed a positive obligation actually to use the premises for one of the stipulated purposes. The absence of an express “keep open” covenant did not detract from the positive nature of the obligation: Montross Associated Investments SA v Moussaieff (Ch) [1990] 2 EGLR 61; [1990] 45 EG 109 not followed; Montross (CA) [1992] 1 EGLR 55; [1992] 05 EG 160 and Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 3 All ER 297; [1997] 1 EGLR 52; [1997] 23 EG 141 considered. The judge had found that the appellant had not attempted to start a business within Classes A1 or A3 and, in all the circumstances of the unusual case, did not need to speculate as to whether the respondent could reasonably have refused consent to a change of use had one been applied for. Having found that the appellant had no intention of running any business within Classes A1 and A3, or any other business, in the future, he was entitled to take those wider considerations into account in the exercise of his discretion when applying the “ought to” test. While the reason for user covenants was normally to preserve the value of the reversion, the respondent was not obliged to demonstrate a quantifiable loss to the value of the reversion in order to establish her case under that head. The judge was entitled to conclude, particularly in the absence of any evidence from the appellant to the contrary, that the appellant’s failure to operate a business within the relevant classes was prejudicial to the respondent’s legitimate interests. The judge had properly held under ground (c) that the appellant ought not to be granted a new tenancy.
Thomas Jefferies (instructed by direct access) appeared for the appellant; James Browne (instructed by Davies Battersby Ltd) appeared for the respondent.
Sally Dobson, barrister
