Many business leases are protected by Part II of the Landlord and Tenant Act 1954 (“LTA 1954”). Unless the parties have contracted out of the LTA 1954, the landlord can only terminate the lease in a way permitted by the Act. When serving a section 25 notice terminating the tenant’s current lease, a landlord has to specify a ground of opposition under section 30(1) setting out why it opposes the grant of a new tenancy. This can be a stumbling block for many landlords who are not aware of this requirement but simply wish to take back possession of their premises.
Ground (g) appears deceptively attractive: it allows a landlord to recover possession if it intends to occupy the holding “for the purposes, or partly for the purposes, of a business to be carried on by him herein”.
The courts have interpreted “intends” so that a landlord must prove two things as at the date of the hearing: a “fixed and settled intention” to actually occupy for the purposes of a business it intends to carry on; and a “check on reality” that it has reasonable prospects of actually being able to occupy the holding for those purposes: Zarvos v Pradhan and another [2003] EWCA Civ 208; [2003] 2 EGLR 37.
Although the section itself does not specify for how long the landlord must intend to occupy the premises, cases such as Patel and another v Keles and another [2009] EWCA Civ 1187; [2009] PLSCS 313 show that in fact the landlord must prove that it intends to occupy them for a number of years after possession is recovered.
Unfortunately, landlords may struggle to show that they are able to satisfy this two-pronged test.
Planning
Something that many landlords neglect to consider is whether they will have planning permission to run their proposed business from the premises. Having the requisite planning permission could be crucial in satisfying the requirements of ground (g) and subsequently gaining possession.
As well as a potential change of use, they might very well have to carry out works to the building to make it suitable for their own occupation. If they will not have planning permission for this, they will fail to show that they have reasonable prospects to occupy themselves.
It is not strictly necessary to have planning permission at the time of the hearing, provided that they have a “real chance” of obtaining planning, such that a reasonable landlord would act on that chance: Cadogan and another v McCarthy & Stone Developments Ltd [1996] EGCS 94.
The difficulty for the landlord, however, is that they must intend to occupy the premises within a reasonable time following the termination of the lease. Given how long planning applications can take, a landlord might not be able to demonstrate that they can occupy the holding for the purpose of running their business at the end of the tenancy if they do not already have planning.
If planning permission has been refused, the landlord might want to consider a planning appeal. The landlord needs to show reasonable prospects of such an appeal at the time of the hearing; if the appeal is successful before the hearing, they can rely on this change of circumstance. They should strongly consider calling expert evidence to prove the appeal has a real chance of success. They will require permission from the court under part 35 of the Civil Procedure Rules for expert evidence. If a party appeals, the appellate court is then entitled to take into account changes in the planning status of the holding: Davy’s of London (Wine Merchants) Ltd v City of London Corporation and another [2004] 3 EGLR 39.
Deemed permitted development
In Church Motor Co Ltd v The Trustees for Methodist Church Purposes and others (unreported, 2015) the authors represented a church which wanted to take back possession of a car repair garage and was able to successfully rely on the deemed permitted use in default of its failed planning application.
An added point in this case was that a church’s use can constitute a “business” use for ground (g): Parkes v Westminster Roman Catholic Diocese Trustee [1978] 2 EGLR 50.
A section 25 notice under LTA 1954 was served, relying on ground (g). The garage’s use class was B1 (light industrial). Before the hearing, the church’s planning application to change the land use class to D1 (for, or in connection with, public worship) was rejected by the local planning authority.
The church was able to prove, by reference to the minutes of its meetings, that, notwithstanding this setback, it intended to use the site for storage of its effects. Storage (land use class B8) has deemed planning permission for a B1 planning unit under the Town and Country Planning (General Permitted Development) (England) Order 2015. The church succeeded at first instance. The tenant appealed to the Court of Appeal, but before it was heard, the landlord’s appeal on the planning decision succeeded.
Careful consideration
When a landlord “intends” to occupy premises it must show that it has reasonable prospects of being able to do so. There is an interplay between being able to demonstrate an honest and real intent to occupy for its own business and the straitjacket that planning requirements (including land use classes) will impose on the landlord’s plans.
Those advising a landlord on ground (g) will need to carefully consider the likelihood of a successful planning application and the limits that will be imposed on the landlord’s proposals, especially if they are also intending to rely on ground (f) (redevelopment) as an alternative ground.
David Sawtell is a barrister at Lamb Chambers and Alice Lane is a solicitor in the dispute resolution and employment team at Pothecary Witham Weld Solicitors
