Under the Landlord and Tenant Act 1954 (the 1954 Act), some tenants of commercial premises have the right to renew their leases indefinitely. The landlord cannot refuse the tenant a new lease, except on certain specific grounds.
Once such ground, ground F, allows the landlord to refuse the tenant a new lease if they intend to demolish, reconstruct or carry out substantial works of construction on the premises, (or a substantial part thereof) occupied by the tenant. That is the ground that the landlord relied upon in the case of S Franses Limited v Cavendish Hotel (London) Ltd [2018] in order to refuse a lease renewal to its tenant, S Franses Limited.
The law states that in order to properly satisfy ground F, the landlord must have a ‘firm and settled intention” of carrying out the works on (or very shortly after) the termination of the tenant’s current tenancy.
In this case the landlord, Cavendish, was quite open about the fact that it was only intending to carry out the works as a means to satisfying the ground in order to achieve possession, and for no other reason. It had drawn up a scheme of reconstruction works designed purely for the purpose of satisfying ground F; and it was common ground that the scheme submitted was of little or no practical or commercial utility otherwise. Nevertheless, the landlord gave, at the request of the court, an undertaking to carry out the works if possession was obtained, evidencing their full intention for the purposes of ground F.
At first instance, the county court decided that, as the landlord intended to carry out the works, it had the genuine intention required by ground F and that motive was not relevant. On appeal by the tenant, the High Court agreed with that finding, but granted leave to appeal to the Supreme Court.
Yesterday the Supreme Court handed down its judgement.
Whilst agreeing that motive was not strictly relevant for the purpose of intention, the Supreme Court focussed on the nature and quality of the intention itself. It applied what they concluded was the ‘acid test’ of whether the landlord would intend to do the same works if the tenant left voluntarily, or if they could otherwise carry out the work around the tenant. In this case, it was clear that the landlord would not have done so and it was found that "conditional" intention of this kind was not the fixed and settled intention required by ground F. As Lord Sumption put it “the landlord’s intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim”. Accordingly, the tenant was entitled to a new lease.
Whilst there might be few cases where a landlord is prepared to go to the lengths and expense of demolishing or reconstructing his building purely for the purpose of removing his tenant, it is inevitable that tenants will seek to put landlords to proof on the question of the nature of their intention when faced with a ground F refusal. It also seems reasonable at this stage to assume that the same challenges can be applied to other grounds for refusal in the 1954 Act, such as ground G.
