The recent decision in Youssefi -v- Musselwhite [2014] EWCA Civ 885 provides useful guidance for landlords when looking to oppose the grant of a new lease on the ground of substantial breaches by the tenant of its obligations under the current tenancy or for any reason connected with the tenant’s use or management of the holding. 

This case demonstrates that, while there is a high bar to be satisfied for landlords to show that the tenant ought not to be granted a new tenancy as a result of their failure to comply with their repairing obligations, landlords may be able to benefit from a broad approach taken by the Court in relation to substantial breaches of the current tenancy. The Courts will look at prejudice to the landlord without requiring the landlord to show a quantifiable loss.

The case concerned a lease of a dwelling house shop and premises. The landlord opposed the grant of a new lease on the following grounds:

Ground A – the tenant had failed to comply with her repairing obligations under the lease by failing to control the plant growth at the rear of the property (Section 30(1)(a) LTA 1954). 

Ground B – the tenant had persistently delayed in paying rent (Section 30(1)(b) LTA 1954).

Ground C – there were substantial breaches by the tenant of her obligations under the current tenancy and other reasons connected with the tenant’s use or management of the holding (Section 30(1)(c) LTA 1954).

The tenant appealed. In her judgment, Lady Justice Gloster gave the following guidance in relation to each ground considered in this case:

Ground A – the Court has to ask itself whether in view of the state and repair of the holding, brought about by the tenant’s breach, the tenant ought not to be granted a new tenancy. This involves the Court focusing exclusively on the state of repair.  The Court should then, looking forward to the hypothetical new term, ask whether the proper interests of the landlord would be prejudiced by the grant of a new tenancy.  This would involve considering whether it would be unfair to the landlord, having regard to the tenant’s past performances and breaches, if the tenant were to be foisted on the landlord for a new term. 

The Court of Appeal upheld the judgment at first instance thereby confirming that there was a breach of the tenant’s implied covenant to use the premises in a tenant-like manner.

Ground B – the focus is on the persistent delay in paying rent which has become due and nothing else. The arrears in this case were persistent but minor.  The Judge at first instance held it would not be right to treat the arrears of rent as a ground of objection and this was upheld on appeal.

In order to succeed therefore a landlord is likely to be required to evidence significant and persistent arrears and therefore prejudice to itself in the granting of a new lease.

Ground C – The Court should adopt a broader approach and focus not merely on “other substantial breaches” but also, or alternatively “any other reason connected with the tenant’s use or management of the holding”. Citing a previous case (Evershed MR in John Kay Ltd -v- Kay[1952] 2 QB 258), Lady Justice Gloster considered that the Court has a duty to look at whether, if a new lease is granted, the breach is such as will prejudice the proper interests of the landlord. For a landlord to demonstrate that his interests are prejudiced it is not necessary to prove that the relevant breach adversely affects the rental income or value of the reversion.

The landlord in this case provided evidence that the tenant had, on numerous occasions, thwarted the proper attempts at gaining access made by the landlord. The Judge held that the fact that the landlord had not been able to show any loss resulting from the refusal was irrelevant (although she noted that on the evidence the landlord would inevitably have incurred financial loss in the form of wasted surveyors’ fees for visits to the premises when they had been unable to obtain access).

This illustrates that it is good practice for landlords to serve notices prior to inspection and to keep records of any attempts should they wish to rely on this ground.