Insecurity of Tenure following S Franses Limited v The Cavendish Hotel (London) Limited

Business-friendly Court reforms

Few landlords who oppose the grant of a new lease on development grounds (ground (f) of section 30(1) of the Landlord and Tenant Act 1954) would be brave enough to stand in the witness box to state that their scheme of redevelopment works had been cooked up purely to satisfy ground (f) in order to oppose a tenant’s application for a new lease. However, in the Franses case the landlord did more or less just that and the Court refused the tenant’s application for a new tenancy.

In the Franses case the landlord, a luxury hotel, opposed the grant of a new tenancy to its tenant, an art gallery with an associated scholarly archive, on the basis that it intended to redevelop the premises. The landlord gave evidence to the Court that the scheme of works was conditional on getting the Tenant out and even went so far as to admit that the purpose of the scheme was purely to take back possession of the premises.

The Court accepted that the scheme was contrived solely for the purposes of opposing the grant of a new tenancy, that the scheme was not financially viable and that the scheme actually rendered the property unusable for want of planning permission.  However, the Court also accepted that none of those factors prevented the landlord from having a genuine intention to carry out the scheme of works nonetheless and the landlord therefore succeeded under ground (f). The Court confirmed that although a landlord must have a genuine intention to carry out the scheme of works, the landlord’s motive for doing so is irrelevant and it does not even matter if a landlord intends to reverse the works after it has taken back possession of the premises. The Court had to be satisfied that the works were substantial enough to require possession of the premises, and that they went beyond what the landlord would be permitted to do under the lease, but provided the landlord could satisfy these conditions and it undertook to actually do the work the tenant’s application would be refused and it did not matter if the landlord simply reversed the works later on.

The tale is not quite over as this January the Supreme Court granted permission to appeal following a leapfrog certificate granted in the High Court, but in the meantime the decision leaves open the door for landlords with development aspirations to implement schemes of work in order to successfully oppose their tenant’s request for new tenancies. Those landlords will need deep pockets to do the works (and perhaps to reverse them afterwards) and also to meet claims for statutory compensation but where removing a protected tenant is a worthwhile expense a landlord might be minded to face the bill.

Landlords seeking to rely on ground (f) to oppose a business lease renewal, and tenants who find themselves on the other side of opposition, will need to act with caution particularly until the Supreme Court confirms the position following S Franses v. Cavendish Hotels. If you would like further information on this subject, please contact a member of the Real Estate Disputes team at Stevens & Bolton.

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Stephanie White

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