A tenant whose lease is protected by Part II of the Landlord and Tenant Act 1954 has a statutory right to renew its lease, unless the landlord can make out one of seven statutory grounds of opposition (found in section 30(1) of the Act).
Section 30(1)(g) provides that the tenant will not be entitled to a new lease if the landlord intends to occupy the premises for the purposes of a business to be carried on by him, or as his residence (ground (g)). The landlord cannot use ground (g) if it purchased its interest within the last five years of the lease (section 30(2)).
In Patel v Keles, the tenant applied for a new lease. The landlord opposed the renewal on ground (g), claiming that he intended to carry on a newsagent's business at the property. The landlord offered an undertaking to the court that he would not use the premises for two years for any purpose other than a newsagent's carried on by him.
Section 30(1)(g) does not specify for how long the landlord must intend to occupy the property for the purposes of his business. The court noted that the tenant is protected against the landlord selling the reversion shortly before the expiry of the lease to a purchaser who wishes to occupy for the purposes of his business, because of the five-year rule referred to above. However, the tenant is not on the face of it protected against the risk that the landlord takes possession for the purposes of his own business but then quickly sells.
The Court of Appeal ruled that, if at the date of the hearing the landlord had an intention to sell the property within five years, then it would not have the necessary intention to occupy it for the purposes of ground (g). The difficulty presented by the present case was that it was not shown that the landlord had a settled intention to sell. However, the circumstances were such that it was likely that a sale would occur.
The court reached this conclusion on the basis that:
- the undertaking given by the landlord was limited to two years
- the undertaking did not impose any obligation on the landlord to trade from the premises. Rather, it was expressed negatively; not to use the premises for anything other than a newsagent's
- the landlord did not need to carry on a business from the premises as he had other sources of income
- businesses run by the landlord on his adjoining property had closed.
The court ruled that this threw doubt on the genuineness of the landlord's intention to occupy the premises for the purposes of carrying on a business. On that basis, it could not rely on ground (g), and the tenant was entitled to a new lease.
Things to consider
The landlord's intended occupation must be more than short-term if it is to succeed on ground (g). The court acknowledged that what is short-term will depend on the facts of a particular case. However, it ruled that, in any event, if the landlord has a settled intention to sell within five years, ground (g) will not be made out.