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Landlord succeeds in opposing business tenant’s right of renewal by contriving an entirely artificial scheme of works

1 August 2017

Good intentions?

The judgment in S Franses Ltd v The Cavendish Hotel (London) Ltd [2017] EWHC 1670 (QB) was handed down on 3 July 2017, and it certainly makes for interesting reading. In upholding the decision of the County Court, Mr Justice Jay has confirmed that the motives of landlords (immoral or otherwise) should not be examined in deciding whether the criteria of s 30(1)(f) of the Landlord and Tenant Act 1954 have been met.

Ground (f) enables a landlord to oppose a lease renewal when it intends to demolish or reconstruct the premises. However, in Franses, whilst the landlord fully intended to carry out such a scheme of works, it was merely a means to an end; the ulterior motive being to remove the tenant, a textile specialist operating a long-established gallery and tapestry archive.

It was accepted in this case, that the 'factitious' scheme of works proposed by the landlord was contrived only for the purposes of ground (f). Indeed, the landlord admitted that it had no intention of embarking on the works were the tenant to leave voluntarily, which was unsurprising, considering that the proposed £700,000 development would result in a space which could not ultimately (on planning grounds) be used by anyone.

No doubt there will be many who see this as a blatant circumvention of the 1954 Act and a significant dent in tenants’ security of tenure. Indeed, it was submitted by the tenant that it could not have been Parliament’s intention to allow wealthy landlords to subvert the protection that the 1954 Act confers on business tenants, by simply promising to undertake works for the sole purpose of evicting the tenant, thereby "sterilising buildings and rendering them unusable".

However, Jay J. held that questions of motive are irrelevant, and that in a ground (f) case, the court must only consider what the landlord intends to do and whether he intends to do it, not why. In this case, the landlord gave the court an undertaking to carry out the works within a specified time, and the court considered that it had showed a fixed, settled and unconditional intention to do so. Accordingly, as long as that intention can be shown, that of itself is sufficient to defeat a tenant’s claim for renewal, even if the works proposed are completely factitious and likely to be immediately reversed.

Whilst many have expressed surprise at this result, and concern that it seriously threatens the security of tenure provided for by the 1954 Act, no new law has been made here. The 1954 Act doesn’t contain any anti-avoidance provisions, and as Jay J. commented: "although it may be predicated on the assumption that market forces will usually generate commercially viable projects, that is not a hard substratum of legislative policy".

The tenant has indicated an intention to appeal, and we understand a leapfrog appeal certificate has been issued by Jay J enabling the tenant to apply directly to the Supreme Court for permission. We are watching this space with interest…

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