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Lawbite: good intentions...

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate litigation

17-07-2017

S Franses Limited v The Cavendish Hotel (London) Limited [2017] EWHC 1670 (QB)

The Landlord & Tenant Act 1954 (“the Act”) automatically entitles business tenants to renew their leases when their current tenancy comes to an end. Landlords are only entitled to object on certain specified statutory grounds.  One commonly used is Ground 30(1)(f) of the Act (often referred to as “the redevelopment ground” or “ground f”).

In this case, a landlord (Cavendish) had deliberately devised a scheme of works  for the sole purpose of establishing reliance on the redevelopment ground. The High Court held that Cavendish could still succeed on ground f and declined to order that Franses be granted a new tenancy. The Court found that Cavendish had sufficient intention to carry out the works and reaffirmed that the landlord’s motives for the works are irrelevant. Furthermore, it was also clear that the proposed works would create space that could not lawfully, on grounds of planning legislation, be used by anybody for a period time whilst planning issues were resolved. 

Franses had served a request for a new tenancy on Cavendish pursuant to s26 of the Act in respect of the ground floor and basement premises that they occupied (the remainder of the building being Cavendish’s hotel). In order to satisfy the statutory requirements, Cavendish intentionally created a scheme of works costed at c.£700,000, which had no commercial or practical utility, made little financial sense and which would have rendered the premises previously let to Franses unusable. The question of whether, in such circumstances, Cavendish had made out ground f was tried as a preliminary issue.

During the course of the County Court hearing, Cavendish openly admitted that it only intended to carry out the works if the Court ruled in its favour.  In support, a Director of Cavendish gave an undertaking to the Court that it would carry out the works in those circumstances. The County Court held that Cavendish could rely upon the redevelopment ground, regardless of its motivation, Cavendish had a “firm, settled and unconditional” intention to carry out the works.

Franses appealed on several grounds, and submissions on his behalf included an argument that “Parliament did not intend that the 54 Act be used to allow wealthy landlords to subvert the protection which it was conferring on business tenants, by promising to do works for the sole purpose of getting the court to make an order under the Act dismissing the tenant’s claim for a new tenancy, with the effect of sterilising buildings and rendering them unusable”. Upholding the decision of the County Court and in line with previous decisions on the relevance of the motivation of landlords, the High Court held that Cavendish had successfully established the requisite intention for the purposes of the Act: its motives for carrying out the works were wholly irrelevant. It was not accepted that this judgment went against the policy of the Act. The Court considered that there may be a general assumption that redevelopment grounds under the Act will only tend to be relied upon where the scheme is commercially viable, however, this is not a statutory pre-requisite.


Key points

  • a landlord who wants to get vacant possession of premises at the end of a tenant’s lease can devise a package of works, as long as they are extensive enough, for the sole purpose of doing so
  • well advised landlords will ensure their commitment to give an undertaking to the Court is apparent from the outset so as to pressurise a tenant
  • a landlord will still have to show in each case that their plans amount  to substantial works of construction or demolition, and demonstrate they have the practical ability to carry out the works in question
  • the case reminds landlords that each distinct work item will be reviewed to see whether it can be discounted in assessing whether the landlord’s plans are sufficient due to being works a) outside of the demise and b) achievable by the landlord under rights reserved in the lease
  • there is no suggestion of any dishonesty or misrepresentation in this case. If a landlord does misrepresent their intentions, the Act provides a right for tenants to seek damages
  • the Act still requires that the tenant is paid statutory compensation by the landlord if they successfully oppose the grant of a new tenancy. This compensation amounts to either the rateable value of the premises, or double the rateable value if the tenant’s business has been in occupation for longer than 14 years. Many tenants will say relocation costs and lost business is far greater than this compensation sum, but that is what parliament has prescribed
  • we understand the tenant in this case will appeal the high court decision, and we will provide a further update when the outcome of any appeal is known

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