The High Court decision in S Franses Ltd v. Cavendish Hotel (London) Ltd [2017] EWHC 1670 will be of interest to landlords and tenants involved in lease renewal proceedings pursuant to the Landlord and Tenant Act 1954 (1954 Act).

Background

S Franses Ltd is the tenant of ground floor and basement premises on Jermyn Street in London. The premises form part of a larger building occupied and managed as a hotel by the landlord, Cavendish Hotel (London) Ltd.

In 2015 the tenant served notice on the landlord requesting a renewal lease pursuant to the 1954 Act. The landlord opposed the grant of a renewal lease on the basis of s. 30(1)(f) of the 1954 Act which provides:

"(f) that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work or construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding" (ground (f)).

The issue

To establish ground (f) a landlord has to show, among other things, that it has the requisite intention to do the works. That intention must be genuine and it must be fixed, settled and unconditional as at the date of the court hearing.

In this case the scheme of works being proposed by the landlord had been devised, at least in part, to satisfy the requirements of ground (f) (and therefore to oppose the lease renewal) rather than to meet any commercial objective. The landlord admitted that if the tenant left voluntarily or if the landlord lost its case and a renewal lease was granted to the tenant, the landlord would not undertake the works. As such the landlord's intention was conditional on the works being necessary to satisfy ground (f). One of the questions on appeal to the High Court was whether or not that meant that the landlord's intention was conditional such that the landlord could not rely on ground (f).

The decision

The court concluded that the landlord's intention was unconditional. The following influenced the decision:

  • the 1954 Act does not contain any anti-avoidance provisions;
  • the court did not accept that the policy of the 1954 Act was to secure the most beneficial and efficient use of land and so arguments that the works were not commercially driven were not decisive;
  • by the date of the hearing (being the date on which intention needed to be judged) the landlord had decided to undertake the works because, on the facts as they stood at that time, it was clear that there was no other way of securing vacant possession; and
  • motive and intention are two separate issues. While an examination of motive may help to illuminate the question of intention it is not determinative of the issue.

The tenant's appeal did however succeed on some of its other points.

Commentary

This case acts as a reminder that a landlord's motives are irrelevant when determining whether a protected tenancy can be brought to an end pursuant to ground (f). Disappointingly for tenants, this means that they may have no protection where their landlord has the appetite, and the means, to pursue ground (f) with the primary objective of securing vacant possession. It is questionable whether this was the original intention of the 1954 Act.

The extent of the works that need to be intended in order to satisfy ground (f) must be enough to require vacant possession of the premises. That is inevitably going to be an expensive exercise so we would be surprised if many landlords would be willing to adopt the same approach as the landlord in this case. However, this decision may well have given a few landlords something to consider if they are unable to satisfy any of the other grounds of opposition set out in the 1954 Act.

Before taking any action though, any party interested in 1954 Act renewals should note that the tenant in this case has been granted permission to appeal direct to the Supreme Court. As such, it will be interesting to see whether this decision stands up to further scrutiny.