Horne & Meredith Properties v (1) Cox and (2) Billingsley [2014] EWCA Civ 423

Summary

The Court of Appeal has upheld a rare decision to deny a tenant the grant of a new lease under the Landlord and Tenant Act 1954 ("the Act") on the grounds of his own behaviour.

In this particular case, the Tenant had embarked on a 16 year campaign of litigation against the Landlord in respect of alleged obstructions to a right of way. The history of litigation was spectacular, and the Tenant was described by the Court of Appeal as a "legal menace".

The Court of Appeal found that this behaviour was to be connected with the "use and management" of the property. Consequently the Tenant's conduct meant that the Court ought not to grant him a renewal lease pursuant to section 31(1)(c) of the Act. Although there was no breach of the terms of the tenancy agreement, it would not be fair to subject the Landlord to the continuing relationship in light of the Tenant's behaviour.

The facts

Since 1981, the Tenant had occupied retail premises in Shropshire for the purpose of his business selling clothing. The lease had been renewed previously, and included the shop premises, rights of way and the right to park in six car parking spaces.

For 16 years or more prior to the expiry of the lease, the Tenant had conducted a sustained campaign of litigation against the Landlord. Over the years, he had issued no fewer than ten separate sets of proceedings, involving nine different sets of solicitors – and four who refused to act for him – and incurring hundreds of thousands of pounds in legal fees for both parties. 
The Tenant claimed that the Landlord was obstructing his rights of way and that it was acting fraudulently. None of the proceedings were successful, and were described by the Court as "spurious", "exaggerated" and "baseless". 

When the existing lease came up for renewal the Landlord opposed the grant of a renewal on the grounds of redevelopment and the Tenant's use and management of the property. The landlord failed on the ground of redevelopment, but succeeded on the ground of the Tenant's use.

The Tenant appealed the decision.

The law

Unlike the grounds of redevelopment, relocation or owner occupation, it is quite unusual for tenants to be denied the grant of a new lease under the "tenant fault" grounds in the Act. As such, there is relatively little case law on the point.

In this case, the Tenant tried to argue that this meant the ground was obsolete, and should not apply. This was dismissed by the Court of Appeal, which said that the Court's job is to "interpret legislation, not to repeal it".

The relevant ground in this case, Section 30(1)(c) of the Act, says that:

    … "the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the tenancy or for any other reason connected with the use or management of the holding."

It is important to note that this is disjunctive. In other words, it is necessary to find that the tenant has committed substantial breaches of the lease or that there is some other reason connected to the tenant's use of the property. It is not necessary for there to be both a breach and another reason.

The issues

The Court of Appeal had to determine whether the "sorry history" of litigation was capable of being a reason connected with the tenant's use and management of the property. This meant taking into consideration:

  1. Whether the right of way formed part of the "holding"
  2. Whether a substantial breach of the lease was required before a landlord could rely upon any other reason connected with the use or management of the holding when opposing renewal under Section 30(1)(c)
  3. If it did, whether the litigation was connected with the use or management of the holding
  4. If it did, whether as a result of the litigation the tenant ought not to be granted a new tenancy

The decision

The Court of Appeal upheld the decision and denied the grant of a new lease for the following reasons:

  1. The relationship between the Landlord and Tenant had broken down irretrievably, so any future dealings would have to be via solicitors. This was due to the Tenant's history of litigation, and there was no reason to believe that he would cease his campaign if he were granted a new lease.
  2. The "holding" included the shop, the rights of way and the parking. Therefore litigation over the rights of way was sufficient to fall within Section 30(1)(c).
  3. It was necessary to establish substantial breaches of the tenancy or any other reason connected to the Tenant's use and management of the property. The word "or" in Section 30(1)(c) separated the provision into two "disjunctive parts". It is therefore not necessary to find a breach of obligation in order to rely on any other reason connected with the use or management of the holding to oppose renewal.
  4. Following previous decisions, the Court found that the existence of extensive litigation    between landlord and tenant could amount to a reason connected with the Tenant's use and management of the holding. In this particular case, as the litigation itself had concerned rights granted under the tenancy, that litigation was connected to the Tenant's use and management of the holding. However, the mere fact that a landlord and tenant have been in litigation will not automatically lead to a refusal of a new tenancy. Each case will turn on its own facts.
  5. Section 30(1)(c) is deliberately a very broad scope. The control of this scope lies with the Court, and it is for the judge to make what the Court of Appeal called a "value judgment" as to whether the tenant ought to be granted a new lease.
  6. Here, the overall question for the Court of Appeal was whether it would be fair to the Landlord, having regard to the Tenant's past behaviour, for him to be compelled to re-enter into legal relations with the Tenant. The Court found that it would not be fair on the basis that the Tenant's conduct had grotesquely exceeded any reasonable balance.

Our advice

Given that there is relatively little case law involving the application of section 30(1)(c) of the Act, this case serves as a useful reminder that the ground can still be used to oppose renewal of business tenancies in the right circumstances. However, this will depend entirely upon the facts and history of the tenant's conduct throughout the lease.

Landlords looking to oppose renewal on any ground should consider the tenant's conduct throughout the tenancy to consider whether ground (c) might be applicable. This is particularly attractive to landlords, as no statutory compensation is payable if the Court refuses to grant a new lease on this ground. Consequently early legal advice should be sought if considering terminating a business tenancy.

Similarly, tenants should bear this case in mind. Although the facts and comments made by the Court of Appeal are extreme, nonetheless it is a clear demonstration that poor conduct throughout the tenancy could jeopardise the right to a renewal lease. Again, this could result in the loss of not only the property, but also statutory compensation. Early advice on the rights and obligations of both parties will help the tenant put itself in a stronger position.