The High Court has recently affirmed that a landlord’s motive behind carrying out works, in the context of an opposed lease renewal under section 30(1)(f) of the Landlord and Tenant Act 1954, is irrelevant. The case of S Franses Ltd v Cavendish Hotel (London) Ltd is noteworthy for a number of reasons, including that the High Court has allowed a “leapfrog” appeal on the basis of public importance, straight to the Supreme Court and bypassing the Court of Appeal.
This may mean that the law in this area could be changing, but for now, the case confirms that regardless of motive, it is the landlord’s settled intention that is the relevant consideration for the Court when determining whether to evict a commercial tenant.
The facts of the case:
The tenant, a textile dealership and consultancy, occupies premises in London, opposite Fortnum and Masons. The premises consist of the ground floor and basement with the remainder of the building being occupied and managed by the Landlord as a luxury hotel, car parks as well as retail outlets.
The tenant served a request for a new tenancy on the landlord under section 26 of the Landlord and Tenant Act 1954, in March 2015. The Landlord opposed that request on the basis that it would be carrying out substantial works to the premises, in accordance with section 30(1)(f) of the Act.
The Landlord put forward three different schemes of works in support of its intention to carry out works to the premises, during the litigation. Details of the third and final scheme put forward by the landlord were provided to the tenant in September 2016, 18 months after the initial request for a new tenancy. The scheme was approved by board resolution in November 2016 and was relied upon on in the Landlord’s amended defence. The exact detail of the works was not finalised until the final day of the trial, in January 2017.
The final scheme of works did not require planning permission which removed this uncertain element of the scheme. Further, as the barrister for the landlord put it, this scheme ‘beefed’ up the internal works to be carried out to the premises including converting the premises in to two units, demolishing a single stair case and constructing two further staircases and removing an existing and constructing a new wall.
The landlord openly admitted during the trial that the works had been designed to achieve possession of the premises and the works would not be carried out if the tenant left the premises voluntarily or the Court ruled against the landlord at trial. However, the landlord’s director stated in cross examination at trial, that the landlord would carry out the works if the court refused to grant the tenant a new tenancy. This, coupled with an undertaking from the landlord, was enough to prove the landlord’s intention to carry out the works and order that a new tenancy be refused.
What can we take from the Court’s decision?
The Court considered whether the landlord’s works could be carried out relying on the rights of entry that the landlord had in the lease. The rights were extremely wide and enabled the landlord to enter the premises at all reasonable times without notice to the tenant to inspect the premises and carry out improvements and repairs to the premises where necessary.
The Court decided that the works were so extensive that entering the premises to carry out the works would be a derogation from grant and a breach of the quiet enjoyment covenant and the works could not be carried out with the tenant in situ.
This is an important reminder that rights of entry in the lease in question must be carefully considered by both landlords and tenants in opposed lease renewal claims. The wider the right, the more extensive the works will have to be to exceed that right. Landlords may find themselves in the position where they are having to carry out works with a tenant in situ if their works are not extensive enough. On the other hand, tenants should be careful what they wish for as, if they succeed in relying on rights of entry, they could find themselves carrying on a business with works being carried out around them.
The Court in this case followed established law in making its decision and decided that motive (ie the desire to obtain possession of the premises rather than to carry out the works to the premises) is irrelevant. The Court is only concerned with assessing whether the landlord has a firm and settled intention to carry out the works and not the reasoning behind that intention.
From a landlord’s perspective the message to take from this decision is that schemes of works, provided they will be carried out, can be designed in order to obtain possession of premises. The works are also capable of evolving and developing over time, and amendments can be made to a landlord’s plans right up to trial.
This may seem somewhat unfair for tenants whose landlords design works which are driven by a desire to evict tenants and obtain possession of premises. There may be a chink of hope for tenants as this case will be considered by the Supreme Court.
Although the law is settled now, it could be in flux. The decision of the Supreme Court will be awaited by landlords, tenants and legal professionals.
If you would like to discuss how our property litigation team can help you, please email Laura or call her on 0113 2462574.