Business tenants have a statutory right, under section 37A of the Landlord and Tenant Act 1954, to claim compensation from landlords who make misrepresentations, or conceal material facts, that cause the court to refuse to order the renewal of a business tenancy or induce the tenant not to make, or to withdraw, an application to renew a business lease. The compensation payable will be an amount ordered by the court as being sufficient to compensate the tenant for the loss or damage sustained as the result of the tenant quitting the premises.
The statutory provision now in force is derived from a Law Commission recommendation made in 1992 (Law Com 208), which was finally transposed into law in 2004 by means of a statutory order under the Regulatory Reform Act 2002. However, there are very few authorities that deal with the payment of compensation in such circumstances. Therefore, Saturn Leisure Ltd v Havering London Borough Council [2014] EWHC 3717 (Ch); [2014] PLSCS 321 will interest landlords, tenants, and professionals who deal with business tenancies.
The case concerned the Romford Ice Arena, which belonged to the council but was operated by a private company. The council needed vacant possession of the site to facilitate a land swop with a retailer. It served a section 25 notice on the operator, opposing any statutory renewal on grounds (b) (persistent non-payment of rent) and (f) (landlord’s intention to redevelop), but also claimed that the operator was not a business tenant within the meaning of the 1954 Act.
In due course, the operator accepted an offer to settle the 1954 Act proceedings and, on receipt of £150,000, vacated the ice rink. However, it subsequently alleged that the council had persuaded it to quit the premises by misrepresenting its future intentions. The case turned on whether the council had stated that it had a settled intention to demolish the ice rink, come what may, or whether it had simply said that it would demolish the ice rink if, and only if, it transpired that the operator had a tenancy that was protected by the 1954 Act.
The trial judge dismissed the operator’s claim. He rejected the operator’s argument that the council had stated that it intended to demolish the ice rink, whatever the circumstances. The council had made it clear that its intention was entirely contingent on there being a finding, or agreement, that the operator had security of tenure.
The High Court agreed with the decision. The council did not need planning permission to demolish the building and the operator was unable to produce any evidence to suggest that the council did not have, or could not have had, an intention to demolish the premises, if needs be. The council’s decisions had been taken with full and proper authority, and it had not misrepresented its position.
The decision enhances our understanding of section 37A and reminds us that ground (f) of the 1954 Act comprises two separate limbs. As a result, landlords are entitled to oppose applications for the grant of new business tenancies if they intend to demolish or reconstruct the premises, or a substantial part of them, and, to satisfy ground (f), demolition alone will suffice.
Allyson Colby is a property law consultant
