When a landlord opposes the renewal of a business tenancy on the ground that it intends to occupy the holding to carry on business there itself, it must satisfy the court that it has a reasonable prospect of being able to do so.
Humber Oil Terminals Trustee Ltd v Associated British Ports [2012] EWCA Civ 596 concerned the renewal of business leases at an oil terminal, which the tenant took in order to serve its oil refineries, which together account for approximately 25% of the present oil refining capacity of the United Kingdom.
When the tenancies expired, the landlord opposed the tenant’s application for renewal on the ground that it intended to assume operational control of the terminal to make it available to additional customers, leaving the tenant with two alternatives: to come to a different commercial arrangement with the landlord, or to move its business elsewhere.
The tenant pointed to the logistical and other hurdles that the landlord would have to overcome were it to remove its own pipelines and infrastructure at the end of the tenancy. It claimed that it would take two years’ work to replace them and cost the landlord £60 million.
The High Court rejected the tenant’s application for a new lease. The judge took the view that, on the termination of the leases, commercial reality would, in all probability, guide the tenant to a new commercial arrangement with the landlord that would enable it to continue to use the terminal to service its refineries. Consequently, the landlord did have a reasonable prospect of operating the terminal itself because the tenant would co-operate with the landlord to make the new arrangements work.
The tenant appealed. It suggested that the judge had reached his decision by an impermissible process of circularity. It argued that the landlord was relying on a state of affairs that would arise only if it were to succeed in opposing the renewal of the tenancies on ground (g). The tenant thought that the landlord should be required to prove that it had a reasonable prospect of implementing its intentions independently of the bargaining position that it would gain were it to win its case – and argued that the landlord had no prospects of doing so without the tenant’s co-operation.
The Court of Appeal rejected the tenant’s argument that it was wrong to consider the viability of the landlord’s intentions on the hypothesis that it had already succeeded in opposing the renewal of the tenancies – and upheld the judge’s decision. It pointed to the words used in the legislation, which require the court to assume that the landlord has resumed possession.
Their Lordships explained that a landlord opposing the grant of a new tenancy on ground (g) must establish what he intends to do “on the termination of the current tenancy.” In other words, the 1954 Act requires the landlord’s prospects to be assessed on the footing that he is entitled to possession: Westminster City Council v British Waterways Board [1985] AC 677 applied. Consequently, the judge’s decision was correct.
Allyson Colby
Property Law Consultant
