Motive vs. intention in lease renewals
Business tenants whose leases are protected under the Landlord and Tenant Act 1954 are entitled to renew those leases on expiry of the term unless the landlord can show that one or more of the grounds set out in section 30 of that Act applies. Ground (f) enables the landlord to oppose the tenant’s renewal if the landlord ‘intends’ carrying out substantial works which cannot reasonably be undertaken with a tenant in occupation.
The Supreme Court decision in the recent case of S Franses Limited v The Cavendish Hotel (London) Ltd  UKSC provides important guidance in the use of ground (f) objections and teaches some stark lessons along the way.
Some might say the case exposes a landlord’s ulterior motives when relying on ground (f) to oppose a lease renewal; however, the question of motive remains to some extent unchanged – that is, the landlord’s motive for carrying out the works is irrelevant. In fact, this case emphasises what we already know – that the question is one of intention.
In this case, the landlord hotel admitted that its proposed works were designed purely to satisfy ground (f) and prevent the tenant from renewing the lease. That in itself was not the landlord’s downfall – and the case reinforces the established principle that a landlord may deliberately design a programme of works specifically to oppose the tenant’s application for a new lease under ground (f) – rather, it was the fact the landlord also admitted it would not actually have carried out the works had the tenant chosen to leave voluntarily or had the Court decided that the works could be undertaken notwithstanding the tenant’s occupation.
The landlord’s ground (f) argument successfully defeated the tenant’s case for a new lease both at first instance and on appeal. However, unusually, the High Court permitted the tenant to appeal directly to the Supreme Court, bypassing the Court of Appeal.
The Supreme Court unanimously allowed the appeal. It accepted that the standard required for ground (f) was a firm and settled intention to carry out works. However, the “acid test” was whether the landlord would still undertake those works even once vacant possession had been obtained. Here the landlord’s intention was conditional: the landlord intended carrying out the works only in order to get the tenant out and not, for example, if the tenant had voluntarily vacated.
Accordingly, the court concluded that a conditional intention of this nature does not satisfy ground (f), which assumes that a landlord’s intention to redevelop is being prevented by the tenant’s occupation. The landlord’s intention must exist independent of the tenant’s statutory claim to a new tenancy. As such, the landlord’s intention to undertake works could not be conditional on whether the tenant chose to request a new lease.
So what does this mean in practice? If the landlord can demonstrate a definite intention to undertake works regardless whether the tenant leaves voluntarily or the court decides the matter, then motive cannot be a deciding factor.
This case is different in that the landlord openly admitted the conditionality of his intention. Doubtless there have been other instances where landlords have had similar motives behind their stated intention but have been subtler about them.
This decision will not prevent ground (f) cases in the future, but we expect landlords to be more careful when devising plans to challenge a tenant’s renewal, ensuring that any proposed works are specific enough to necessitate possession of the property. We also expect tenants wishing to renew their leases to be more alive to landlords’ ground (f) objections, and better placed to challenge them.
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