For non-lawyers the recent case of Hough v Greathall Ltd  EWCA Civ 23 might seem to be a typical case of lawyers being pedantic. However, the decision reasserts an extremely important timeline for landlords of business tenancies who wish to oppose the renewal of a secured business tenancy for the purpose of redevelopment.
Where a tenant of business premises has security of tenure under the Landlord and Tenant Act 1954 (the “Act”), it has a right to a new lease at the end of its current tenancy. However, the Act enables landlords to oppose the grant of a new lease where it is the landlord’s intention to redevelop the land, known as ground (f).
To satisfy this ground, (a) the whole or a substantial part of the Property which the tenant uses for business purposes must be the subject area of the redevelopment,
(b) the landlord must require possession of the Property to carry out the works, and
(c) the landlord must show it intends to start the redevelopment at the end of the tenancy. This last requirement does not mean the landlord must actually be ready to start work on the day of termination of the lease, but rather that it will do so within a reasonable period of time after the termination of the lease.
With regard to intention, a landlord must demonstrate both a firm and settled intention along with a reasonable prospect of achieving that intention. Traditionally this meant that all matters relating to the development (i.e. planning permission obtained, building contracts completed, etc.) did not have to be completed at the time the landlord serves the notice. Rather, by the case of Betty’s Cafés Ltd v Phillips Furnishing Stores Ltd  AC 20, the House of Lords established that a landlord does not have to prove its intention to redevelop until the hearing date at which a Court decides if the landlord’s application is successful. It was this point of law which the tenant in Hough v Greathall challenged.
The tenant argued that changes made to the wording of section 25 of Act by the Regulatory Reform (Business Tenancies) (England and Wales) Order (SI 2003/3096) altered the date on which a landlord’s intention had to be demonstrated from the date of the Court hearing to the date of the service of the notice. It further argued that the principle of pre-action disclosure required a landlord to evidentially support its claimed intention to redevelop the property prior to the commencement of proceedings.
Fortunately for landlords, the Court of Appeal (“CoA”) rejected the tenant’s arguments. The CoA found no evidence that, by changing the wording of section 25 of the Act, Parliament intended to alter the date by which a landlord must show its intention under ground (f). Further, the Court was not convinced that pre-action disclosure affected the date on which the landlord had to demonstrate intention, as the time limits imposed by the Act normally require a court application prior to any pre-action procedures being usefully deployed.
Thus although a seemingly trivial argument, a welcome decision for landlords.
For further information regarding this topic or any other property and construction matter, please contact the Edwin Coe Property team.
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