Sending in the builders
Ground F Section 30(1) Landlord & Tenant Act 1954
In my last article on the grounds that a landlord can rely upon to oppose the grant of a new commercial lease, I whet your appetite by saying that this article would cover Grounds (f) and (g). However, those of you who are eagerly anticipating (!) a discussion on Ground (g) will have to be patient. Having started to produce this article, I was reminded that there is more to Ground (f) than initially meets the eye and have therefore limited this article to Ground (f).
Ground (f) provides that a Landlord can oppose the grant of a new tenant on the basis that
"... on the termination of the current tenancy 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 on the holding or part thereof that he could not reasonably do so without obtaining possession of the holding".
Ground (f) is a ground that is often relied upon by Landlords to oppose the grant of a new lease to a commercial tenant as, if the Court accepts that the provisions of Ground (f) are satisfied, the Court has no option but to dismiss the Tenant's application for a new lease. So, what are the key points to remember with Ground (f)?
- Ground (f) only relates to work to be carried to that part of the property that the Tenant occupies for the purpose of its business (this is known as "the holding"). If works are to be done to parts of the property which the Tenant leases from the Landlord but does not occupy for the purpose of its business, then the Landlord is not able to rely upon these works as part of its opposition to a new lease under Ground (f).
- If the lease provides the Landlord with the right to enter the property and carry out the works in question and the end result is that the property is still fit for the Tenant's business, the Landlord may not be able to rely upon Ground (f). If, however, once the works have been completed the property is no longer fit for the Tenant's business, the Landlord could rely on Ground (f). The phrase often uttered by lawyers that "each case depends on its own facts" comes to mind!
- It is for the Landlord to persuade the Court that it has a fixed and settled intention to carry out the works. It is not enough for the Landlord to simply say "I've decided to do the work". The Landlord must be able to show that consideration has been given to what the works will entail and what needs to be done to achieve the works. This may include producing evidence not only of the Landlord having obtained/is in the process of or pursuing planning permission, has the necessary funding and has put in place contracts with contractors, but also evidence of having identified any potential problems associated with carrying out the works and come up with solutions to those problems.
- The Landlord must show that it has a reasonable prospect of fulfilling the intention to carry out the works. If there is no reasonable prospect of the Landlord being able to carry out the works, then the Landlord's opposition to the grant of a new lease on the basis of Ground (f) will fail. For example, if the works would require planning permission but there is little to no prospect of planning permission being obtained, it is difficult to see how the Landlord will be able to persuade the Court that Ground (f) is satisfied.
- The Landlord must intend to carry out the works at the end of the existing tenancy, this being:
- in the event that no lease renewal proceedings have been issued, the date in the Landlord's section 25 notice or the day before the date in the Tenant's section 26 notice; or
- if lease renewal proceedings are issued by the Tenant, 3 months after the proceedings are disposed of (note that in most cases, the proceedings will be disposed of 21 days after an Order determining the proceedings has been made)
- The Landlord does not need to be ready to start the works on the date the existing tenancy ends, but should do be planning to do so within a reasonable period of time of the tenancy ending e.g. no more than a few months .after the end of the tenancy.
- The Landlord's motives for doing the works are irrelevant, as was confirmed in the 2017 case of S Franses Limited v The Cavendish Hotel (London) . In that case, the Landlord wanted vacant possession of the property. The Court held that the fact that the Landlord intended to do works to the property for no other reason than to satisfy Ground (f) and thereby secure vacant possession was irrelevant.
- If the Tenant is prepared to accept a new lease which provides the Landlord with the right to enter the property to carry out the works, or alternatively is prepared to accept a new lease of only part of the property, Section 31A Landlord & Tenant Act 1954 could scupper the Landlord's Ground (f) opposition. This is often overlooked by Tenant's facing opposition to the grant of a new lease on the basis of Ground (f).
- If the Court is satisfied that the Landlord has the requisite intention to carry out relevant works and the Tenant is unable satisfy section 31A Landlord and Tenant Act 1954, it will dismiss the Tenant's application for a new lease.
- As the Ground F is a "non-fault" ground, that is, the Tenant's entitlement to a new lease is lost due to no fault of the Tenant, the Tenant is entitled to statutory compensation.
Ground (g) is next, followed by a final article on the statutory compensation that a Tenant may be entitled to in the event that a landlord opposes the grant of a new lease. In the meantime, if you have any queries arising from this series of articles or wish to discuss any contentious property related matter, contact Chris Drinkall, Rollits' Head of Property Dispute Resolution, on 01482 337367 or by email at firstname.lastname@example.org.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.