Landlord’s Ground (f) opposition narrowly defeated

Summary

This judgment raises some interesting points for landlords and practitioners on how the timing and funding of a proposed redevelopment may defeat a landlord’s opposed lease renewal application under section 30(1)(f) of the Landlord and Tenant Act 1954 (the “Act”). The decision demonstrates the challenge landlords face where opposing renewal under this ground. The case will be of most relevance to landlords and tenants of properties in England & Wales involved in lease renewals under the Act, particularly where redevelopment works are contemplated. 

The background

The landlord sought to oppose its tenant’s application for a new tenancy of “the Railway Bell” pub in London relying on Ground (f), on the basis that it intended to take back the pub and convert it to a mixed commercial and residential development. 

The legal test

A successful Ground (f) opposition requires a landlord to demonstrate a firm and settled intention to demolish, reconstruct, or carry out substantial construction works, which cannot reasonably be done without obtaining possession of those premises. The intention must be genuine and not “conditional”, in that the landlord needs to demonstrate that it intends to carry out the scheme of works whether or not the tenant intends to leave (established in S Franses Ltd v Cavendish Hotel (London) Ltd [2019] AC 249 SC). 

The County Court's findings

The tenant’s submissions were that Ground (f) was not satisfied because the landlord:

1. had failed to demonstrate that there were works which it could not reasonably carry out without obtaining possession
   
   The court rejected this submission, finding there was sufficient evidence that the landlord could not carry out the proposed works without fundamentally breaching the covenant of quiet enjoyment in the tenant’s lease or derogating from grant.
   
   
2. did not have a firm and settled intention to carry out the works and would not have done so if the tenant had left voluntarily
   
   The court also rejected this submission, being satisfied on the evidence that the landlord did have a firm and settled intention to carry out the works, and whilst the landlord’s plans may have been accelerated because of the tenant’s application, it would nonetheless have proceeded with the development had the tenant left voluntarily.
   
   
3. had failed to show that it had a real prospect of overcoming the relevant hurdles (planning permission, a restrictive covenant and funding) and commencing the works within a reasonable period
   
   This argument was partially accepted. The landlord faced several “hurdles” – some of which were considered surmountable (planning permission and resolving an uncertain restrictive covenant noted on the landlord’s title). The court was also convinced that the 10 - 14-month period for the works was reasonable on the facts. Critically, however, the court was not satisfied that there was any real prospect that the landlord’s directors/shareholders would be able to provide sufficient guarantees to a lender, to be able to obtain funding for the works. It is for this “narrow ground”  that the landlord’s opposition ultimately failed.

It is unclear whether the landlord has lodged an appeal. If not, it will now be for the court to decide on the terms of the new tenancy unless the parties are able to agree these.

Key takeaways

• notwithstanding that the tenant only succeeded on one part of its third submission, this was sufficient to defeat the landlord’s opposition in its entirety. The case emphasises that when the landlord’s question is “have I done enough to satisfy Ground (f)?” the answer will continue to require a critical review of the established principles against the specific circumstances in each case
• whilst existing case law confirms that a “reasonable time” for carrying out works could, depending on the facts, be between 3 and 12 months of determination of the tenancy, this decision highlights that there are circumstances in which a 14-month period may be reasonable. In some cases, a tenant’s refusal to allow a landlord to obtain access to the premises to carry out surveys which would further its planning application could be relevant in deciding whether the timeframe is reasonable
• whether a landlord engages in “tactical manoeuvres”, like accelerating its plans for development, will not necessarily be relevant to the court when considering whether the landlord’s intention to develop is “conditional” in the Franses sense