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26 October 2017

134: Insecurity of tenure – statutory right to renew called into question

Blog written by Manasa Shanker, Paralegal with BDB

The case of S Franses v Cavendish Hotel (London) Limited [2017] involves a landlord attempting to regain possession of business premises protected under the Landlord and Tenant Act 1954 on the grounds that the landlord intended to redevelop. The startling factor is that the motive for the landlord’s re-development was purely in order to evict the tenant and obtain vacant possession.

Background

The tenant ran a textile dealership on the ground floor and basement of a building, the rest of which was occupied by the landlord as a luxury hotel. The tenant had occupied the premises for over 25 years and had recently served notice on the landlord under section 26 of the 1954 Act to renew its lease.

The landlord served a counter notice opposing the renewal under section 30 (f) of the 1954 Act, which allows a landlord to oppose a new tenancy if they require possession of the premises. This is in order to carry out demolition and reconstruction works or other substantial work to such an extent that it cannot be carried out without full possession of the building.

Case Analysis

The key fact was the landlord decided to redevelop purely to get the tenant out of the premises. Indeed it was even admitted by a witness for the landlord that if the tenant were to leave voluntarily, or if attempts to get the tenant out of the premises under section 30 (f) failed, the redevelopment works would not be carried out. Despite several creative arguments, the court found in favour of the landlord and held that the landlord’s counter notice was valid regardless of his motivations.

In the High Court, the tenant contested whether the landlord’s intention was sufficient given that it was conditional on the works being necessary to satisfy ground (f). The tenant submitted that it was clear that Parliament intended ground (f) to apply in situations where buildings needed to be improved to be put to best use and not to provide a loophole to wealthy landlords.

The judge did not accept this argument. In his words – ‘ground (f) mandates an examination of what the landlord intends to do and whether he intends to do it, not why he may intend to do it’. The judge accepted that the motive may be looked at to consider whether the intention was genuine and serious, however the ‘wrong’ motive is irrelevant as per the wording of ground (f).

Practical points

There is concern that this case could open up floodgates which will allow landlords to force out business tenants using sham development plans. In this case, the landlord gave an undertaking to the court to carry out works at the premises to a value of £700,000. At such a high cost, it seems unlikely there will be an opening of floodgates, although it has highlighted a loophole in the 1954 Act.

This case has been both leapfrogged to the Supreme Court for appeal and sent back to the County Court for further findings of fact, so we expect to see more developments shortly.

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