The Harrison Drury Blog

Insecurity of tenure for business tenants

Judge's gavel in court alongside a stack of booksProperty litigation lawyer Laura Hallett Lea examines a recent high court decision which considered whether a landlord’s proposed development was contrived with the sole aim of forcing out a tenant.

What was the case about?

In S Frances Limited v The Cavendish Hotel (London) Limited, the High Court considered whether a landlord’s proposed development scheme, purportedly contrived solely with a view to defeating a business tenant’s request for a new commercial lease, was sufficient grounds to successfully oppose the grant of the new lease.

Why is this important?

Part II of The Landlord and Tenant Act 1954 (the Act) governs this area of law.  It was devised with a view to promoting security for tenants of business premises given that much of a tenant’s goodwill is normally attached to the premises it occupies.

Where a tenant has the protection of this Act they are referred to as having ‘security of tenure’ – which means they have a right to a new lease at expiry of their lease. There are certain grounds under which a landlord can seek to refuse the grant of a new lease under the Act. One of these grounds is that the landlord intends to demolish or substantially reconstruct the premises, meaning that the tenant cannot go on occupying. This is known as Ground F.

What was the background to the case?

In the S Frances case, the tenant held a lease of a sought-after London premises which was due to expire in January 2016. Accordingly, the tenant served a notice requesting a new lease. The landlord subsequently sought to oppose the grant of a new lease, citing Ground F. The landlord’s position was accepted in the county court. The tenant appealed to the High Court on the basis that the landlord’s motive was purely to obstruct the tenant’s right under the Act to be granted a new tenancy; they argued there was no other practical or commercial reason for the proposed works.

What did the High Court decide?

The High Court sided with the landlord. They considered that the landlord’s motive was irrelevant; Ground F only requires an intention to carry out the works. If the court is satisfied of this, then the landlord has met that condition and the tenant does not get a new lease.

This decision has divided schools of legal thought. Some consider it to be a reflection of the wording of the Act, while others consider it undermines the purpose the Act was seeking to achieve; i.e. security of tenure for business tenants – and protection of that business’s goodwill.

What does this mean for landlords and tenants?

As unfair as this decision may seem, it does at least clarify the position. The onus remains on the word “intention”; any landlords seeking to defeat a tenant’s request for a new tenancy would be wise to ensure that their intentions are clear and thoroughly evidenced, regardless of their reasons for wishing to avoid the new tenancy.

Tenants should be aware that so long as the landlord has the intention to demolish or substantially reconstruct the premises, their motives for carrying out the works are irrelevant.

For more information on the law surrounding security of tenure, or any other landlord and tenant issues, contact Laura Hallett Lea on 01772 258321.

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