Terminating business leases: landlord’s intention to redevelop

Where premises are let under a lease within the protection of the Landlord and Tenant Act 1954, at the end of the lease the tenant has a statutory right to either claim a new lease or remain in occupation. The landlord can only recover possession or refuse a new lease if they can demonstrate certain statutory grounds.

The recent Supreme Court case of S Franses Ltd. v The Cavendish Hotel (London) Ltd, handed down in December 2018, examines one of these grounds, Ground F, in detail. Under Ground F, the landlord can oppose a tenant’s request for a new tenancy if they intend to carry out works to the premises and could not do so with the tenant in occupation.

In the case, the landlord intended to carry out works and needed access to the premises to do so, but openly admitted that the only purpose of the works was to satisfy Ground F and get rid of the tenant. If the tenant left the property, the landlord would not carry out the works.

For obvious reasons, the tenant took issue with this. But the County Court and High Court both found that the landlord’s reasons for carrying out the works were irrelevant. All that mattered was that the landlord intended to carry out works, and could not do so with the tenant there.

Supreme Court

The Supreme Court agreed that the landlord’s motive was irrelevant, but concluded that an intention to carry out works conditional on the tenant being in occupation was not a sufficiently ‘fixed and settled’ intention to satisfy Ground F. As a result, the tenant was entitled to remain in occupational and take a new lease.  The Court went on to say that if the works the landlord proposes are of not objective use to the landlord, this could be considered evidence that the landlord’s intentions are not fixed and that Ground F may not be satisfied.

This decision potentially places an additional burden on landlords relying on Ground F. Even when planning ‘genuine’ works, landlords can expect their plans and the reasons behind them to come under greater scrutiny. Having a clearly articulated business case for why the landlord wants to carry out works will strengthen their case and ensure they get the outcome they need.