1954 Act comes under attack

The High Court has ruled that a landlord’s development scheme, contrived for the sole purpose of defeating a tenant’s security of tenure, allows a landlord to successfully oppose a tenant’s statutory request for a new lease.

The case of S Franses Limited v The Cavendish Hotel (London) Limited was decided earlier this month and has divided opinion. It is a case that dealt with the Landlord and Tenant Act 1954 and a tenant’s attempt to exercise its statutory right to renew its lease.

Some have said that this case has exposed a serious flaw in the 1954 Act. Others say that what occurred in this case was perfectly above board and that the Act is alive and well.

In a nutshell, the business tenant, S Franses Limited, occupied a unit in a prestigious location in London. Its lease expired in January 2016 and it therefore served notice seeking a new lease, as it was entitled to do under the 1954 Act.

The Act allows a landlord to oppose the grant of a new tenancy if it intends to demolish or reconstruct the tenanted premises. In this case, the landlord did oppose the tenant’s request for a new tenancy and provided the court with evidence that it intended to carry out substantial works to the property and that it would be impossible to do so without obtaining vacant possession.

The County Court accepted the landlord’s intentions and refused the tenant’s request for a new lease. The tenant appealed on the basis that the works that the landlord was proposing to carry out were of no practical or commercial use to the landlord and were simply works that the landlord had designed for the sole purpose of evicting the tenant. In other words, this was a completely contrived scheme of works that had no purpose other than to enable the landlord to satisfy the court that it needed vacant possession of the property.

The tenant argued that the 1954 Act should not be construed in such a way as to allow wealthy landlords to subvert the protection which the Act conferred on business tenants.

The High Court disagreed and dismissed the tenants appeal. The court held that the landlord’s motive for carrying out the works is irrelevant. All the court is required to look at is the landlord’s intention to carry out the works. If the landlord intends to carry out the works, irrespective of the reason for carrying out those works, then the provisions of the Act are satisfied.

Is this decision going to encourage wealthy landlords to come up with unrealistic and commercially unworkable development schemes so that they can get rid of unwanted tenants? Possibly. The case confirms that there is nothing to prevent a landlord from carrying out the works and then immediately reversing those works.

For many, this decision leaves a bitter taste in the mouth. The 1954 Act is all about providing business tenants with protection. Does this decision not sit a little uneasily with the purpose of the Act?

For any advice in relation to issues raised in this article, please contact Andrew Turner on 01242 586 841 or aet@hughes-paddison.co.uk

This article features in the Hughes Paddison Summer 2017 Property Disputes Update. You can view a summary of the full content of the newsletter and download a copy here.