Would you have carried out the works if the tenant had given vacant possession?
The recent decision in S Franses Ltd v The Cavendish Hotel (London) Ltd has had an important impact on the balance of the relationship between commercial landlords and tenants concerning security of tenure.
The decision has important ramifications for landlords who are relying on the redevelopment of their property to remove a secure tenant, and for tenants who are being required to give vacant possession of a property due to a landlord’s redevelopment.
The Facts
The case concerned a shop called S Frances on the corner of Duke Street and Jermyn Street in Mayfair which deals in specialist tapestries, carpets and textiles. Its landlord was, and remains, The Cavendish Hotel which occupies the rest of the building in which S Frances has its shop.
S Frances’ has the protection of security of tenure meaning it was entitled to a renewal lease on the determination of the existing lease. However, the landlord didn’t want S Frances in occupation any more. That being the case, The Cavendish Hotel opposed a tenancy renewal under ground (f) of s.30(1) of the Landlord & Tenant Act 1954 (the landlord requires the tenant to vacate to enable the landlord to redevelop the property) and proceeded to draw up plans for, amongst other things, the lowering of the basement and the division of the property into two units and extending part of the Cavendish’s lobby into the shop area.
The Decision
For a landlord to rely on ground (f) they have to show subjective intention – i.e. that they actually will carry out the works – and objective means to do so which is usually funding, contractors in place, planning permission etc.
The Cavendish Hotel’s scheme of redevelopment didn’t actually make a great deal of commercial sense:
- They weren’t applying for planning permission for a change to C1 use from the existing Sui Generis use required by S Frances;
- The lowering of the basement was by a few centimetres; and
- The division of the shop wasn’t a full division as the proposed dividing wall didn’t extend the full length of the shop. Indeed the location of the shop’s door, which wasn’t going to be moved, meant you’d only be able to access Unit 2 by walking through Unit 1. The expert witness determined that the works had little commercial merit.
But for the purposes of ground (f) this should have been sufficient for The Cavendish Hotel to get over the line. They had to show actual intention to redevelop – tick. And they had to show means – tick. They were going to carry out the works in order to remove the tenant and spend a lot of money doing so even if the redevelopment made no commercial sense but their motive didn’t matter, just that they satisfied the legal tests. Indeed, in order to prove their point they gave an undertaking to the court that they would do so. Case… closed.
However…
… in cross examination the landlord was asked: if the tenant had given vacant possession at the end of their lease would the landlord have still redeveloped the property? The ultimate answer was ‘no’ and the court found in favour of the tenant on that basis.
The Acid Test
And so a new acid test for relying on ground (f) of s.30(1) of the Landlord & Tenant Act 1954 has been born: If the tenant had given vacant possession, would the landlord have carried out the redevelopment works?
What Does this Mean for Landlords and Tenants?
Landlords must ensure that they would redevelop even if the tenant had given vacant possession and tenants who believe that they’re the victim of uncommercial redevelopment just to remove them from a property need to be prepared to ask that question of their landlord – in court, if needs be.
It’s likely that there will be more cases flowing from this decision and it looks like the courts are moving toward examining the motives of a landlord when reviewing their schemes to redevelop and remove secure tenants.