Opposing a 1954 Act lease renewal on redevelopment grounds: Does motive matter?

A look at the recent decision of S Franses Ltd v Cavendish Hotel (London) Ltd.
  • Submitted 1 August 2017
  • Applicable Law UK (England & Wales)
  • Topic Real Estate

S Franses Ltd (S Franses) is a textile dealership and consultancy. It is the tenant of premises on the ground floor and basement of 80 Jermyn Street. Their Landlord, Cavendish Hotel (London) Ltd (Cavendish), occupies the rest of the building which is a luxury hotel.

S Franses held two leases of the premises which expired in January 2016. The leases benefitted from the protections of the Landlord and Tenant Act 1954 (1954 Act) and the statutory right to renew. Cavendish opposed renewal of the leases under s.30(1)(f)1954 Act. This permits a landlord to oppose renewal on the following basis:

"(f) that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work or construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding."

Cavendish had five different schemes for the redevelopment works. It was S Franses’ case that "some aspects of the intended works have been contrived only for the purposes of ground (f)". This appears to have been accepted by the Court. Indeed, Cavendish conceded that the proposed works would not be undertaken at all if the tenant left voluntarily or a new lease to S Franses was ordered. The Judge at first instance noted that Cavendish’s main witness had been:

"transparently candid about the Landlord's motives in devising Scheme 3 which she accepts has been designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works' commercial or practical utility and irrespective of the expense. However, the underlying motive is irrelevant unless it be such that it undermines the protestation of the Landlord that it has a genuine and settled intention to proceed."

In the County Court, a director of Cavendish provided a written undertaking that all works would be carried out if vacant possession was ordered on ground (f).

There were several grounds of appeal but most notably was S Franses’ argument that:

"It is submitted that, by enacting ground (f), Parliament intended that the protection of business tenants should not be a barrier to buildings and land being improved and modernised, so as to be put to their most beneficial and efficient use, which is in the public interest. However, it is inconceivable that it was Parliament's intention to allow wealthy landlords to simply 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."

The High Court noted that the 1954 Act does not contain any anti-avoidance provisions and that it is intention not motive which is relevant; the judge commenting that in his view an examination of the landlord’s motives was in fact "impermissible". It appears considerable weight has been given to the landlord’s undertaking to do the works.

There were several other grounds of appeal and included in these were issues as to the extent to which the proposed works could be carried out under existing and very wide ranging rights of entry under the lease, the court noting that the tenant was willing to "put up with almost anything in order to secure a new tenancy". In short, S Franses’ basic position was that the works could be carried out under the rights of re-entry and they could simply continue with their occupation once the works were complete. Cavendish’s position, which the County Court favoured, was that this was not possible and that the works would amount to derogation from grant and breach of the covenant for quiet enjoyment. However, the High Court returned the case to the County Court for further consideration as to whether some works could be carried out under the right of entry (and therefore did the works which did not fall under the right of entry require possession) together with issues related to the time frame allowed for commencement of the landlord’s works. The key issue in relation to the time frame was whether, objectively, the practical difficulties linked to the works could in fact be overcome to enable the landlord to prove an intention to begin the works of demolition etc "on the termination of the current tenancy”. If they could not do so within whatever the relevant time frame was determined to be, then as the judge noted, the objection to the new lease would fail.

Comment

The answer to the question is that in the context of opposing a 1954 Act lease renewal under ground (f) the intention of the landlord is everything and its motive does not matter. This case is not new law and it is certainly an expensive and inconvenient option for a landlord to bring about the end of a tenancy. However, subject to any further appeal (and issues as to time frame and the extent to which the works require possession of the holding), the approach will see this landlord achieve vacant possession. As noted in the judgment the 1954 Act does not contain anti-avoidance provisions.

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

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