Business lease renewals: is the landlord’s motive still relevant?

This case started as a standard business lease renewal, where the landlord opposed the grant of a new lease on ground 30(1)(f) of the Landlord and Tenant Act 1954 (the 1954 Act): namely, that the landlord wanted to redevelop the building and could not do so without obtaining vacant possession.

The tenant in the case (S Franses) is a textile dealership and consultancy, with specialisms in antique tapestries and textile art. It occupied the ground and basement of 80 Jermyn Street, in St James’s, London. The remainder of the building is a luxury hotel, the Cavendish.

The premises has a specific sui generis use. In terms of the area generally, Westminster City Council has designated St James’s as a “Special Policy Area” where the Council seeks to protect and promote private members’ clubs, art galleries and niche retail outlets. Any planning application submitted by the landlord would be considered in line with the designation as a Special Policy Area.

The landlord (The Cavendish Hotel) opposed renewal on redevelopment grounds. A scheme of works was designed by the landlord specifically with the intention of satisfying the test in section 30(1)(f).

In addition, the landlord admitted that the works would not be carried out if the tenant left the unit voluntarily.

The County Court found in favour of the landlord

In the County Court, the landlord succeeded and the judge agreed that it had satisfied the ground (f) test. The tenant appealed.

Grounds of appeal

The tenant had seven grounds of appeal in total – they can be broadly categorised into three main topics:

Intention v Motive

(a)The current position is that the landlord’s motive for opposing a lease renewal is irrelevant. If the landlord has a genuine intention to carry out the works then it does not matter what his motive is. The landlord here was clear that its motive was to obtain vacant possession.

(b)The tenant argued that the court should take a more purposive approach when it interpreted the 1954 Act and that the landlord’s motive should be taken into account.

(c)The tenant drew a comparison between the protection offered under ground 30(1)(g) (own occupation) i.e. that the landlord must intend to occupy for a sufficient length of time. Compare this with ground 30(1)(f) where the landlord can, if it wants to, reverse the works once they have been carried out.

Timing: when does the landlord need to intend to carry out the works following the termination of the current tenancy?

(d)The County Court judge gave the landlord 12 months after the trial to commence the works. There was no discussion around why this was a reasonable length of time. This issue is going back to the County Court.

(e)The issue of timing will always be fact sensitive. The position remains that the landlord should be allowed a ‘reasonable time’ after the termination of the current tenancy to carry out the works. As a general rule, we should continue to advise clients that works should be commenced 3-6 months after the termination of the current tenancy.

Can the works can be carried out under the landlord’s rights of entry under the lease?

(f)In very simple terms, in a ground (f) case, those works that can be carried out lawfully by the landlord under its right of entry must be disregarded. Those works that cannot be lawfully carried out under the right of entry then fall to be assessed to ascertain whether ground (f) is satisfied.

(g)This process had not been followed at first instance so this issue is going back to the County Court.

So, what has changed?

At the moment, there is no change in the law. The landlord’s motive is still irrelevant in deciding whether the test for ground (f) has been met.

However, watch this space, as the tenant is appealing to the Court of Appeal/Supreme Court, asking the court to reconsider the body of caselaw on landlord’s motive, dating back to the 1950s.

A successful appeal by the tenant would be disrupt several decades of caselaw and practice on business lease renewals. We will, of course, keep you updated with any developments.