Many business tenants enjoy qualified security of tenure under the Landlord and Tenant Act 1954, so that where a tenant requests a new tenancy, the landlord may only oppose the request on certain limited grounds as set out in the Act. One of those grounds is known as “ground (f)”. This ground covers a situation where the landlord wishes to develop the property, and that redevelopment cannot be carried out whilst the tenant is in occupation.
In the case of S Franses Limited v The Cavendish Hotel (London) Limited, the Cavendish Hotel (the landlord) had tried to remove a tenant occupying the ground and basement floors of its hotel on the basis that it wished to carry out redevelopment works under ground (f). Unusually, the landlord admitted that its intention to redevelop the premises was motivated only by the need to satisfy ground (f) and to serve no other commercial purpose, in other words the landlord wanted the tenant out. The County Court accepted the landlord’s evidence, and further accepted that the landlord’s motivation for the works was irrelevant. The court held that, as the landlord had a settled intention to redevelop and the works were capable of implementation, ground (f) was satisfied.
The County Court decision was upheld by the High Court, but permission was granted to allow the tenant to appeal direct to the Supreme Court, leap-frogging the Court of Appeal. The Supreme Court disagreed with the lower courts, holding that the landlord’s intention to carry out works cannot be conditional on whether the tenant chooses to assert its claim to a new tenancy and to persist in that claim. The acid test is whether the landlord would intend to do the same works if the tenant left the property voluntarily. In this case, the landlord only intended to carry out a particular scheme of works to get rid of the tenant, and it would not derive any benefit from the reconstruction itself. Accordingly, the Supreme Court unanimously allowed the appeal, deciding that ground (f) could not be invoked by the landlord.
The Supreme Court decision provides important guidance about how to assess the meaning of a landlord’s intention for the purposes of ground (f). Whilst tenants may welcome the decision on the basis that it may improve their bargaining position on a lease renewal, it may ultimately result in landlords offering more tenancies to tenants that are contracted out of the protection of the Act, to ensure that the landlord can obtain possession at the end of the term.
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