Opposing lease renewals on ground (f)

Georgina Redsell and Phillip Gale discuss what a landlord needs to show to resist a claim for a new tenancy on the ground that the landlord requires possession to redevelop. Question I am a landlord of commercial premises and the tenant has applied for a new tenancy under the Landlord and Tenant Act 1954. I wish to obtain vacant possession and am considering opposing the tenant’s claim on the basis that I intend to redevelop (known as “ground (f)” under the statutory scheme). I have put together a package of works which I am told would be sufficient to come within ground (f). Some of the works require planning permission and I have been advised that we are likely to be refused permission for the external works and for change of use. Without permission the works are of no real commercial or practical benefit to me. However, I would still be willing to do the works as long as I can get vacant possession. My sole motivation is to get rid of the tenant. Will the court consider my motives? What if I provide an undertaking to carry out the works? How quickly would I need to start them? Answer Generally speaking, a court will only look at whether you have a firm and settled intention to do the works and not what your motive is for doing them. That said, if the works are utterly contrived and the sole motivation is to oust the tenant, the court will be sceptical of a landlord who claims to have a firm and settled intention. In terms of timing, the works must commence within a short time of the tenancy terminating. The exact timing will depend on how long is reasonably required to initiate the works and what is reasonable in all the circumstances of the case. You must be able to show that you have a “firm and settled intention” to carry out the necessary works under ground (f). There are two elements to this: (1) do you genuinely intend to carry out the works; and (2) do you have a realistic prospect of implementing that intention? Your motive in proposing the works should be irrelevant as long you can show that your intention is honest and genuine as well as settled and unconditional. In S Franses Ltd v The Cavendish Hotel (London) Ltd [2017] EWHC 1670 (QB); [2017] PLSCS 145 (see EG, 29 July, p67 and 26 August, p48) the landlord had devised a package of works with its lawyers, aspects of which it admitted at trial had been contrived only to satisfy ground (f). For example, the landlord proposed demolishing an internal wall only to immediately replace it with a similar wall, artificially lowering part of the basement floor slab and providing no lawful access to one of the retail units proposed to be laid out (access was only possible through another unit). In order for the development to be of any practical use, the landlord would have required planning permission for additional external works to allow for access into the property and a change of use. Despite there being little commercial sense in carrying out the works, the landlord provided a written undertaking to the court, promising to commence the works as soon as vacant possession had been obtained. The landlord was successful in resisting the tenant’s claim despite it being clear that the works had been predominantly designed to evict the tenant. The tenant argued that it was inconceivable that it was parliament’s intention to allow wealthy landlords to subvert the protection of the Landlord and Tenant Act 1954 by promising to do works for the sole purpose of getting a court order for vacant possession. However, the appeal judge confirmed that ground (f) deals solely with intention and not motive. The court may examine what the landlord intends to do and whether he intends to do it but not why he intends to do it. Motive was not totally irrelevant: the more commercially unviable or synthetic a project, the closer the court will wish to examine the landlord’s intention to do the work.  Written undertaking One of the reasons why the court in Franses was prepared to accept the landlord’s case that it intended to carry out the proposed works was the written undertaking given by the landlord to carry out the works. Breach of that undertaking would be a serious matter and a contempt of court. In Espresso Coffee Machine Co Ltd v Guardian Assurance Co [1959] 1 WLR 250 (a case concerning ground (g) of the Act) it was held that where a responsible landlord offers an undertaking to the court, this will be powerful evidence of the landlord’s fixed intention, although not conclusive. Landlords would therefore be well advised, particularly if the proposed redevelopment has doubtful commercial or practical viability, to provide an undertaking to the court that the works will be carried out. It should be mentioned that Franses represents a particularly striking example of contrived works defeating a tenant’s claim and that the court was bound by authorities representing the settled law that motive is largely irrelevant to ground (f). It is understood that the tenant has been granted a certificate for a leapfrog appeal to the Supreme Court for permission to appeal. There may therefore be further guidance on this issue in due course. Timing The landlord has to show, as at the date of trial, that it has the relevant firm and settled intention to carry out the works. In terms of when the landlord must intend to start the works, it must be shown that the works will be carried out “on the determination of the current tenancy”. This has been held to mean within a short time of the tenancy ending. That does not mean that you have to be ready with bulldozers the moment the tenancy expires, but you should be able to persuade the trial judge that your plans have moved “out of the zone of contemplation” and “into the valley of decision”. The trial judge in Franses held that a reasonable time for commencing the works was within 12 months of obtaining vacant possession. What is reasonable will depend on the facts of each case but the 12-month period in Franses was unusually generous to the landlord and should not be used as a yardstick. Indeed, the 12-month period was successfully challenged by the tenant (albeit on the basis that the judge gave insufficient reasons) and the question has been referred back to the county court for further consideration. As a landlord, it is always advisable to be organised and demonstrate that you have detailed plans put together as early as possible to encourage a settlement and avoid the need for a fully contested trial. Georgina Redsell is a senior associate in the property litigation team at Charles Russell Speechlys LLP and Phillip Gale is a barrister at Enterprise Chambers