Summary and implications
If a tenancy is protected under the Landlord and Tenant Act 1954 (the 1954 Act), the landlord can oppose renewal under ground (g) – that the landlord intends to occupy the premises for its own purposes.
- The landlord must have a firm and settled intention to occupy and that intention must be proved at the date of the hearing.
- The landlord’s application will fail if there are too many hurdles to overcome, or if the landlord has little control over those hurdles.
- The court should not examine the financial viability of a landlord’s genuinely held plans. The court does not have to decide whether a landlord’s business will be more or less successful or efficient than the tenant’s current business; all the court must decide is whether the landlord intends to occupy for the purposes of its business.
- A purchaser/landlord of freehold premises must have owned the premises for five years before it can oppose renewal under ground (g) of the 1954 Act.
The tenant was a JV company which had a lease of an oil terminal
The tenant, Humber Oil Terminals Trustee Limited, was a joint venture company formed by two large oil companies.1
The tenant held four leases of the Immingham Oil Terminal (the IOT). The landlord was Associated British Ports.
Each company in the joint venture owned nearby oil refineries which were serviced by the IOT.
The landlord wanted to terminate the tenant’s leases on the basis of ground (g)
The landlord served notices under section 25 of the 1954 Act. The notices terminated the tenant’s four leases and indicated an intention to oppose any application for the grant of new tenancies on the basis of ground (g).
The landlord made a number of statements when opposing renewal:
- The IOT was the most strategically located facility for deepwater access for oil tankers;
- The tenant had exclusive use of the IOT within the Port of Immingham; and
- The tenant was not operating the IOT efficiently.
The landlord wanted to occupy and manage the IOT itself to maintain supply to the nearby oil refineries and to open the oil jetty (demised to the tenant under one of the leases) to third party users. This would mean that the tenant would need to enter into a commercial arrangement with the landlord to continue to use the IOT to supply the nearby oil refineries.
If the landlord was unsuccessful and the leases were to be renewed, then the landlord proposed that the combined rent under the renewal leases should increase from £4.2m to £23.7m.
The tenant argued that the landlord could not prove that it intended to occupy the IOT
The tenant applied to the High Court for the grant of four new tenancies under the 1954 Act.
The tenant claimed that the landlord could not prove the necessary intention to occupy under ground (g). The tenant pointed out that on termination of the leases, it would be entitled to remove its infrastructure from the IOT, which would cost around £10m. It would cost the landlord a further £60m and take about two years to replace the equipment.
The High Court decided that the landlord did have the necessary intention
The High Court found that the landlord did satisfy the required intention to occupy the IOT.
The court was convinced by the landlord’s evidence that it was genuine in its motivation to obtain better value for the port facilities and to expand competition in the port and attract third party customers.
The tenant’s suggestion that the landlord’s plans were merely aspirational was rejected. The court was satisfied that the landlord was a major port operator with substantial financial backing and it would be able carry out its stated objectives on the termination of the leases.
The court also took the view that the tenant would probably come to a commercial agreement with the landlord to continue to use the IOT and the infrastructure it had installed, rather than having to remove it.
It was not for the court to decide whether the landlord’s approach was commercially sensible
It was not up to the court to decide whether the landlord’s approach was a prudent business decision, provided that the proposals had a reasonable prospect of being completed.
A landlord could use ground (g) as a tactic
This case highlights the possibility that a competitor could buy the freehold of premises, wait five years, then use ground (g) to drive a tenant off the premises and carry on the business at the premises itself.
Ground (g) of the 1954 Act
“… on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence.”