Under the Landlord and Tenant Act 1954 (“the Act”), tenants of business premises have a statutory right to a new tenancy, save in seven situations specified under the Act (known as the grounds set out (a) – (g) in Section 30(1) of the Act). One of those situations arises where the landlord wishes to redevelop the property and can oppose the grant of a new tenancy under ground (f). If the landlord intends to rely on this ground, it must prove its intention to redevelop to the satisfaction of the court.
Landlord must prove intention to redevelop
In recent years, there has been a raft of case law considering when the landlord needs to prove this intention. The current position is that the intention must be proven at the date of the court hearing of the specific issue or the tenant’s application for a new tenancy. This has been upheld in the recent Court of Appeal decision in Hough -v- Greathall Limited, which was decided in January 2015.
In this case, the landlord served a Section 25 notice on the tenant to terminate the lease, seeking possession of the property on the basis that it intended to carry out redevelopment works. The tenant did not accept the landlord’s plans and so applied to court for a new tenancy, meaning the landlord had to prove it had a firm and settled intention to redevelop.
At first instance, the court accepted the evidence put forward by the landlord of its firm and settled intention and the tenant was ordered to give up possession of the property.
However, the possession order could not be enforced until a final point of law was determined on appeal. The judge at first instance found that the relevant date for proving intention to redevelop was the date of the hearing; however the tenant argued that the relevant date should be the date stated in the Section 25 notice for the termination of the lease. If this were correct, the landlord would not have proved its intention as at this date and therefore the tenant would be entitled to a new lease.
The tenant appealed the first instance decision on this point, on the basis that the trial judge had misapplied the law.
Change of tense affects timing of intention to redevelop
The leading case on this point is Betty’s Cafés Limited v Phillips Furniture Stores Limited [1959] AC 20 which found that the landlord’s intention to redevelop must be shown to exist at the date of the hearing. The thinking behind this was that when the ground of opposition is given in the Section 25 notice, it is effectively warning the tenant of the landlord’s case he will have to address at the hearing.
The tenant in the Greathall case sought to argue with this longstanding case law and distinguish the current case by virtue of the change in the wording of the Act amended by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (“the 2003 Order”), which came into force in 2004.
Before the amendments, Section 25 of the Act required a landlord to state in its notice whether it would oppose a new tenancy based on the relevant ground of opposition. Under the current wording of Section 25, a landlord is now required to state whether it is opposed to the grant of a new tenancy. The full wording of the relevant section is set out below:
“A notice under this section which states that the landlord is opposed to the grant of a new tenancy to the tenant shall not have effect unless it also specifies one or more of the grounds specified in section 30(1) of this Act as the ground or grounds for his opposition.”
The tenant argued that this change to the present tense meant it was clear the landlord should have the appropriate intention when serving the Section 25 notice. He also argued that if the requirement was for the landlord to show the requisite settled intention at this earlier stage, it “would afford to the tenant significant further protection enabling him to request, where desirable, pre-action disclosure under the Civil Procedure Rules, prior to initiating the application for a new tenancy, and to embark upon suitable pre-action protocol correspondence to test the landlord’s true intentions prior the inception of proceedings”.
Argument rejected by Court of Appeal
The Court of Appeal did not accept these arguments and held that the change in wording of Section 25 had been necessary due to the removal of the requirement for a tenant to serve a counter notice to a Section 25 notice. The court clarified this by explaining that the conditionality of the phrase “would oppose” was for cases where landlords were waiting to see whether the tenant would willingly give up possession of the property, or would serve a counter notice instead.
The 2003 Order was passed following extensive consultation with the Law Commission and the Regulatory Reform Committees of both Houses of Parliament. The Court of Appeal found nothing in the 2003 Order to suggest “the previously understood position as to the date for establishing a Landlord’s intention under Section 38(1)(f) was to change”.
The Court therefore upheld the existing thinking that a landlord does not need to provide evidence of his intention to redevelop until the date of the hearing. Whilst there is no radical change in law here, this confirmation will come as a relief to landlords who were facing the possibility of having to frontload their claim for possession under the Act at a very early stage. Had the case been decided differently, landlords would have to incur significant costs in readying their evidence of intention well before service of the Section 25 notice.
