THE BACKGROUND

The rationale behind Part II of the Landlord & Tenant Act 1954 is to protect the business interests of tenants. Unless a lease of commercial premises is specifically excluded from the legislation, then on its expiry – provided certain formalities are complied with – the tenant is entitled to a new lease on similar terms at a market rent.

A landlord is only entitled to oppose renewal of the lease if the tenant has been a “bad” tenant – not paid the rent, failed to comply with its obligations in the lease – or on two “no fault” grounds:-

  • that the landlord intends to redevelop the premises; or
  • that the landlord intends to occupy the premises for the purposes of a business to be carried on by it.

The landlord must prove a firm and settled intention to redevelop/occupy at or soon after the date of any hearing.

The Landlord & Tenant Act 1954 was substantially amended in 2004, including the provision of a new section (37A(2)) to cover a situation where the tenant has left the premises either after making and subsequently withdrawing an application for a new tenancy; or without making an application; and it is made to appear to the court that it did so by reason of misrepresentation or the concealment of material facts. We have just had the first decision of the Court of Appeal on that section.1

THE FACTS

Inclusive Technology (“Inclusive”) occupied business premises under a lease which was due to expire in December 2006. In February of that year, Mr Williamson – the landlord – warned Inclusive that possession might be required at the end of the lease in order to carry out refurbishment works. This was subsequently confirmed by the tenant in a conversation with the landlord’s agent. In June 2006, the landlord served a section 25 notice to expire at the end of January 2007, opposing renewal on the redevelopment ground. The covering letter referred to the previous exchanges and said that it was necessary to obtain vacant possession to carry out the intended works. By September 2006 the landlord had decided to delay the works but did not inform the tenant and instructed his agent to market the property.

In November 2006, the tenant signed a lease on new premises and relocated its business in December 2006. Once Inclusive discovered that in fact the landlord was not intending to refurbish, it commenced proceedings under section 37A(2) for damages for misrepresentation or the concealment of material facts.

THE DECISION

Carnwath LJ in the Court of Appeal said that the purpose of the 1954 Act was to encourage fair dealings between the parties. The landlord’s right to determine the lease and so disrupt the tenant’s business were based on his subjective intentions and could be open to abuse. He therefore held that the landlord’s failure to inform the tenant that its intentions had changed amounted to misrepresentation and concealment, which led to the tenant giving up possession of the premises and the tenant was therefore entitled to compensation.

The Court of Appeal did however hold that the mere inclusion of the ground of opposition in a section 25 notice was not sufficient to amount to a representation.

THE LESSONS

The lessons which landlords should take from this case are:

  • be very careful about what you tell the tenant about your intentions; and
  • if your intentions change, notify the tenant as soon as possible.