Landlord’s intention to redevelop in Landlord and Tenant Act 1954 proceedings: S Franses Ltd v The Cavendish Hotel (Supreme Court decision)

Background

The Supreme Court handed down judgment on 5 December 2018 following a “leapfrog” appeal directly from the High Court. The case involved the owner of the Cavendish Hotel on Jermyn Street in central London opposing their business tenant’s application for a new lease under the security of tenure provisions of the Landlord and Tenant Act 1954 (Act).

The Act grants a qualified right for business tenants to request that their landlord grants them a new lease at the end of the contractual term of their existing lease. This request can then be opposed by the landlord on various specified grounds.

Section 30(1)(f) of the Act (Ground F) allows a landlord to oppose a new tenancy if the landlord “intends to demolish or reconstruct the premises…or to carry out substantial work of construction…that he could not reasonably do so without obtaining possession”.

Intention – Ground F

The landlord openly admitted that they had put together a scheme of works which was designed purely to require possession back of the leased premises. The landlord could also demonstrate a genuine intention to carry out the substantial and expensive works despite those works resulting in no benefit or utility to them.

Previous case law relating to Ground F established that a landlord’s motive was irrelevant and that the only question to ask was whether there is a genuine intention to demolish or reconstruct. The Supreme Court did not overrule this test but, instead, added an extension to the analysis of whether a landlord had the requisite intent.

The Supreme Court held that the landlord only had a conditional intention to carry out the proposed works. The landlord admitted that if the tenant was to leave of its own accord, or if the tenant had not requested a new tenancy, then it would not proceed to carry out any works. When establishing intention, Lord Sumption stated that “the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily”.

The Supreme Court also discussed a hypothetical situation whereby a landlord genuinely intended to carry out some works but included additional spurious works purely to establish sufficient grounds to require possession back of the entire property. In this situation, the Court would disregard the additional artificial works and resolve the issue based on the works which the landlord unconditionally intended to carry out.

Lord Sumption, delivering the leading judgment, was not convinced that the landlord had to demonstrate any commercial purpose or utility for the proposed works in order to establish the requisite intent. However, he held that whilst motive or purpose were irrelevant in themselves, motivation could be investigated in order to establish what a landlord’s real intention was.

Conclusion

The case represents a “win” for business tenants (and common sense) meaning that landlords can no longer create a scheme of works designed purely to block a tenant’s request for a new lease under the Act. The landlord will now need to prove, at the date of the hearing, both a settled intention to carry out works which are extensive enough to require possession back of the whole property and that the landlord would carry out those works whether or not the tenant was requesting a new tenancy.

For further information please contact Paul Jagger