Supreme Court rule on motives behind opposing lease renewal in landmark case

At the end of last year, the Supreme Court handed down judgment in S Franses Limited v The Cavendish Hotel (London) Limited, determining whether the landlord had the right to oppose the grant of a new tenancy to the tenant under the Landlord and Tenant Act 1954.

The tenant was a textile dealership, specialising in antique tapestries and textiles, and occupied the ground floor and basement of the property under a lease of 25 years from 2 January 1989. The rest of the property was both occupied and managed as a hotel by the landlord.

As the terms of the lease were coming to an end, the tenant served notice to the landlord requesting a grant of new tenancy. However, the landlord then served counter notice opposing the tenant’s application under ground (f) s.30 of the 1954 Act:

“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 of construction.”

The proposed works, which were said to convert the premises into two retail units, had little practical utility because planning permission would be required and there would be no external door to one of the units. Lord Sumption questioned if the landlord would intend to do the same works if the tenant had left voluntarily – ‘the acid test’ – in which he admitted: “the works are thoroughly intended because they are a way of obtaining possession.”

The landlord went on to give evidence that he hoped the departure of the tenant would allow for an additional 28 bedrooms to be added to the hotel. These works, however, were not the works relied upon by the landlord for satisfying ground (f) of the 1954 Act.

Lord Briggs concluded, “that a tenant’s statutory right to a new tenancy should not be circumvented by the proposed works which, viewed as a whole, would not have been undertaken by the landlord if the tenant had left voluntarily.”

Following this judgment, landlords who wish to rely on ground (f) of the 1954 Act to oppose granting a new lease will need to do so with caution, ensuring that any planning redevelopment will have some sort of purpose and not for the sole reason of removing a tenant.

What grounds can a landlord oppose granting a new commercial lease?

If you are looking to renew a tenancy, a Section 26 Notice form, (which sets out the tenant’s proposed terms for a new lease), must be sent to your landlord. Upon receipt, the landlord will have two months to decide whether they wish to continue granting the tenancy.

If the landlord opposes the renewal, the landlord will challenge the request using one or more of the seven specific grounds for terminating leases under s.30(1) of the 1954 Act. For example, if the tenant has failed to make appropriate repairs during their current tenancy or have consistently failed to pay rent on time, a landlord may have the right to refuse granting a new commercial lease.

Contact our Commercial Leases Lawyers, London

Whether you are a tenant or landlord, we have a wealth of experience advising clients on grants and renewals of commercial leases. Contact Anglo Law solicitors today via the online enquiry form for qualified legal guidance and representation.