Redevelopment ground and business lease renewals – S Franses v Cavendish Hotel

10th December 2018

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The Supreme Court has ruled that a landlord seeking to terminate a 1954 Act protected tenancy in reliance on ground (f) (the redevelopment ground) must show that it will carry out the intended works and that the intention must exist independently of a tenant’s statutory claim for a new tenancy.

Background

The Landlord and Tenant Act 1954 (the 1954 Act) provides tenants with a statutory right to renew their tenancies of business premises, subject to the ability of the landlord to oppose renewal on a limited number of grounds, including ground (f), which provides:

"on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding"

The existing case law had established that a landlord must have a fixed and settled intention, as at the date of trial, to carry out works of redevelopment to satisfy ground (f) and that, provided a landlord has this intention, the landlord's motive for carrying out the works was irrelevant (even if the sole aim of the works was to satisfy ground (f) and remove the tenant).


Facts

The tenant (Franses) was a textile dealership which occupied the premises on the ground floor and basement of a property. The remainder of the building was occupied and managed by the landlord (Cavendish) as a luxury hotel.

In 2015, the tenant sought to renew its lease and the landlord opposed renewal relying on ground (f). The landlord accepted that the proposed works had no practical utility and the sole purpose was to obtain vacant possession. It gave an undertaking to commence the works if possession on redevelopment grounds was ordered but made it clear that the works would not be undertaken if the tenant left voluntarily.

The lower courts decided that the landlord had satisfied ground (f) and was entitled to possession of the premises. The tenant appealed and permission was given for a leap-frog appeal to the Supreme Court (by-passing the Court of Appeal).

Supreme Court’s Judgment

The Supreme Court unanimously allowed the tenant’s appeal, finding that ground (f) could not be established by the landlord.

The Court held that the landlord’s intention to carry out the works to satisfy ground (f) cannot be conditional on whether the tenant chooses to assert his claim to a new tenancy. The intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim for a new tenancy. Accordingly, the landlord’s purpose or motive is immaterial except to test the genuineness and conditionality of the landlord’s intention, so as to ascertain whether it is in accordance with the statutory objective behind ground (f).

Comment

In this case the entire value of the proposed works lay in removing the tenant and not in any benefit to be derived from the reconstruction itself. Accordingly, the landlord was unsuccessful.

The case provides evidence as to the approach which the courts will take when considering whether the landlord’s intention is in accordance with the statutory objective behind ground (f). Landlords will need to show that they will carry out the intended works whether or not a tenant leaves voluntarily, and, as anticipated by the Supreme Court, this “may introduce an element of complexity and expense into proceedings in the County Court”.

Further Information

If you’d like any further advice, please don’t hesitate to contact a member of Geldards’ Real Estate Litigation Team.

RELATED:   REAL ESTATE LITIGATION - EXPERTISE


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