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Just how relevant is a landlord’s motive?

Supreme Court decision in S Franses Limited v The Cavendish Hotel (London) Limited - Is a landlord's motive relevant to ground (f) of the Landlord and Tenant Act 1954?

The Supreme Court has handed down its eagerly awaited judgment in S Franses Limited v The Cavendish Hotel (London) Limited. Following the decisions of the County Court and the High Court on appeal, some practitioners were predicting the end of protection for tenants under the Landlord and Tenant Act 1954. Tenants will be reassured by the decision of the Supreme Court.

In short, section 30(1)(f) of the 1954 Act allows a landlord to refuse to grant a new lease to a tenant if the landlord intends to demolish, reconstruct or carry out substantial work of construction to the premises and could not reasonably do so without obtaining possession of the premises. The landlord has to show a firm and settled intention to carry out the work and a reasonable prospect of achieving that intention. Prior to this case, provided the landlord can do that, its motive in carrying out the works is irrelevant.

In this case, the landlord had designed a scheme of works with the primary objective of removing the tenant from the premises. It was common ground that the proposed works had no practical utility because although the works themselves did not require planning permission, the landlord could not use the altered premises without obtaining planning permission for change of use, which it did not intend to apply for. The landlord was prepared to run the risk that the premises would be rendered unusable in order to secure its objective of obtaining vacant possession. In the County Court and in the High Court on appeal, it was held that the landlord satisfied ground (f) because it had given an undertaking to the court to carry out the work and the landlord’s motive in doing so was irrelevant.

The Supreme Court accepted that the Landlord and Tenant Act 1954 confers no more than a qualified security on the tenant. Certain interests of the landlord override that security, and one of them is the right to demolish or re-construct its property in whatever way it chooses at the expiry of the term. The appeal did not turn on the landlord’s motive or purpose nor on the objective reasonableness of the proposal. Rather, the appeal turned on the nature or quality of the intention that ground (f) requires.

Lord Sumption said that the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily. The landlord’s intention cannot be conditional on whether the tenant chooses to assert its claims to a new tenancy or to persist in that claim.

On the facts of this case, the landlord had no intention of carrying out the works if the tenant left voluntarily. In Lord Sumption’s judgment, a conditional intention of this kind is not the fixed and settled intention that ground (f) requires.

This therefore questions the previous position that the landlord’s motive is not relevant. It is now clear that the landlord’s motive or purpose may be investigated at trial as evidence for the genuineness of his professed intention to carry out the work.

Some are claiming that this decision brings about a dramatic change to the test under the 1954 Act. These claims must be treated with some caution pending further decisions. The appeal did not really turn on the landlord’s motive or purpose, but rather on what it is that the landlord must intend if ground (f) is to apply. The facts of this case were extreme.

In practical terms, a landlord who genuinely intends to carry out a scheme of works and will carry it out whether the tenant agrees to vacate or not need not be concerned by this decision. It will have the necessary intention to satisfy ground (f). It is landlords who are designing a scheme purely to remove a tenant that will need to be concerned by this case. If the intention to carry out the works is conditional on their being necessary to get the tenant out, and the landlord will not do the works if the tenant leaves voluntarily, then this case can be used to defeat the landlord.

The Supreme Court confirmed that where a landlord intends to carry out some works whether or not it is necessary to do so to obtain vacant possession and additional work only if necessary to remove the tenant, the tenant’s claim for a new tenancy will fall to be resolved only by reference to the works that would be done in any event. This is likely to lead to a greater scrutiny of proposed works by tenants and courts. This case will certainly give tenants more opportunity to question intention.

A landlord is still likely to be able to design a scheme of works that will satisfy ground (f) if it genuinely intends to carry out the works whether the tenant vacates or not.

December 2018

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