42 commercial property Refusing a lease renewal
When must a landlord show an intention to demolish or reconstruct as a ground for opposing a lease renewal? If you are a tenant of business premises, it is possible that your tenancy is protected by security of tenure under the Landlord and Tenant Act 1954 (LTA 1954), writes James Eatwell, senior partner, real estate department, Herrington & Carmichael
This means that your tenancy does not end automatically when the term expires but can only be terminated by the landlord serving a section 25 notice on you and relying on certain grounds under the LTA 1954. One of those grounds is that the landlord intends to demolish or reconstruct the premises, under section 30(1) (f) of the LTA 1954, commonly known as ground (f).
Often, landlords will not be in a position at the time of serving a section 25 notice to satisfy the 'intention' test as they will not be sufficiently advanced with their development plans
In the recent case of Hough v Greathall Ltd [2015], a landlord opposed the tenant’s request for a new lease by relying on ground (f ). The question arose: at what point in time must the landlord show it has the necessary fixed intention to demolish or reconstruct the premises? The court followed the ruling in the earlier House of Lords’ case of Betty’s Cafés Ltd v Phillips Furnishing Stores Ltd [1959], and held that the relevant date was the date of the court hearing relating to the tenant’s request for a new tenancy, not the date at which the landlord served the section 25 notice on the tenant. The court therefore refused to order the grant of a new tenancy.
The tenant appealed against the court’s decision arguing that the original wording of section 25(6) required the landlord to state whether it “would oppose” an application for the grant of a new tenancy, whereas the current wording as amended by the Regulatory Reform (Business Tenancies) (England and Wales) Order (SI 2003/3096) instead requires the landlord to state whether it “is opposed”. The tenant argued that the change of the wording to the present tense implied that the relevant date for the landlord’s intention had also changed to the date of service of the section 25 notice.
The Court of Appeal unanimously dismissed the tenant’s appeal and held that the change in the wording of section 25(6) had no impact on the relevant date for the landlord’s intention. It said that it would not be practical to consider the landlord’s intention at some point in the past given that it is at the time of the hearing that the court must decide if the tenant is entitled to a new tenancy.
Although Hough v Greathall Ltd dealt with a small change to statutory wording, there would have been harsh consequences for some landlords had the Court of Appeal agreed with the tenant in that case.
www.businessmag.co.uk THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2015
Often, landlords will not be in a position at the time of serving a section 25 notice to satisfy the “intention” test as they will not be sufficiently advanced with their development plans and may still have a number of practical hurdles to overcome, such as obtaining planning permission or finance for the project. It will be reassuring to landlords to learn that the law, as established over 50 years ago in the Betty’s Cafes case, has not changed on this point, despite the changes made to section 25 of the LTA 1954 by the 2003 Order.
There are many other pitfalls that face landlords and tenants in relation to lease renewals and if you are unsure of your position or if you would like advice on other landlord and tenant issues or other commercial property matters, contact Herrington & Carmichael’s real estate team.
Details:
Real estate team 01276-686222
realestate@herrington-carmichael.com
James Eatwell 01276-686222
james.eatwell@herrington-carmichael.com www.herrington-carmichael.com
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