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Property Litigation column: A landlord's practical guide to satisfying Ground (f) of section 30(1) of the Landlord and Tenant Act 1954

Litigation Associate, Nikki Yates explains how a landlord can improve their chances of opposing a lease renewal under Ground (f) of section 30(1) of the Landlord and Tenant Act 1954.

Introduction

Section 30(1)(f) (Ground (f)) of the Landlord and Tenant Act 1954 states that a landlord can oppose a lease renewal if:

"…on 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." (emphasis added)

The landlord must consider all the elements of Ground (f).

The case of S Franses Ltd v Cavendish Hotel (London) Ltd [2017] EWHC 1670 QB highlighted that motive is irrelevant provided the landlord has a genuine and settled intention to proceed with the proposed works. It does not matter that the landlord may have contrived those works just to get rid of his tenant as long as he can show that he intends to carry out those works regardless. We understand that the appeal of this case is to be heard later this summer, so things could well change. However, until then, it makes sense for landlords wanting to redevelop their property to design their proposed scheme of works to ensure (to the best of their ability) they meet the requirements of Ground (f).

The works

Firstly, the landlord must ensure the works come within the Ground (f) requirements, and so are either:

  • Demolition
  • Substantial work of construction.
  • Reconstruction.

There is obviously a range of works going from demolition through to not doing all that much to the property. There is no such concept of a "sure thing" in litigation; however, the closer you are to the demolition end of the scale, the more likely you are to meet the works element of Ground (f).

"Substantial work of construction" tends to be the trickier category. Each case is fact specific but usually works such as moving a staircase, removing structural walls and interference with floor slabs will be sufficient. Works such as putting in wooden partitions, new toilets or the installation of pipework are not likely to meet the requirements.

When considering the works to be carried out, the landlord should bear this in mind and, if necessary, adapt his proposals accordingly. It is advisable to seek legal advice at an early stage to ensure a landlord has the very best chance of succeeding in proving his intention to carry out the proposed works to the holding and thus succeed under Ground (f).

Unfortunately, there is always litigation risk as the two Global Grange Ltd cases (Marazzi v Global Grange Ltd [2002] EWHC 3010 (Ch) and Ivorygrove Ltd v Global Grange Ltd [2003] EWHC 1409 (Ch)) made clear. These cases, which involved two adjoining hotels and essentially the same or very similar scheme of works, are difficult to reconcile. The landlord was successful in one case and not in the other. It just proves that on a different day with a different judge, a different outcome is not outside the realms of possibility, which the landlord must also bear in mind as he will only get one chance to prove his intention. However, if there is a deal to be done with the tenant so that they vacate without the need for proceedings, this will obviously give the landlord certainty and save on legal costs.

The holding

The landlord needs to also bear in mind how the works relate to the individual holding. This is particularly relevant for a large site with multiple holdings. The works proposed need to be considered in respect of each individual holding to ensure that the works are sufficient as discussed above.

Obtaining possession of the holding

The landlord must also show that he could not reasonably carry out the proposed works without obtaining possession of the holding. The lease provisions need to be checked, as well as whether the work could reasonably be carried out with the tenant in situ.

A clause that allows the landlord to enter the property to make improvements to it can be sufficient to allow a landlord to carry out significant works. A tenant may not be able to rely on the reservation if it entitles the landlord to enter premises to carry out works but requires it to make good all damage. The proposed works may make it impossible to make good the damage: for example, if walls are to be knocked down and not replaced, or a unit is to be split into two.

The court will also consider the disruption caused to the tenant's business during the works. The courts have held that works taking –two to four weeks can be carried out within the reservation but works requiring physical possession for –five to eight months cannot. This is an unreasonable length of time to exclude the tenant from its business. As a rule of thumb, generally, works which will exclude the tenant from the premises for more than 12 weeks will disrupt the tenant's business sufficiently to require legal possession to carry out the work.

If the works will result in the premises being entirely different to that currently occupied by the tenant and not fit for the tenant's business, then the works cannot be carried out under the reservation and the landlord will require legal possession.

Intention

The relevant date for the landlord to prove his intention is the date of the hearing. The landlord must show not only that he has a firm and settled intention (the subjective part of the test) but also that he has a realistic prospect of implementing that intention (the objective part of the test).

If the landlord is an individual, the first part can be done by way of witness statement. If a company, the necessary resolution will need to have been passed. Whether the landlord can show he has a realistic prospect of implementing the intention will depend on what he has done by the time of the hearing in terms of practical elements in respect of the proposed development. The following should be considered:

  • Plans - these should be detailed as they help to show that the landlord has settled on a position. Without plans it may be said that the landlord is still considering the options. Also, without detailed plans it is not possible to get accurate costings.
  • Planning permission - this is not a pre-requisite but it saves significantly on legal costs if planning permission has already been obtained by the time of the trial (otherwise expert evidence on the likelihood of obtaining planning permission will be required).
  • Third party consents - any consents that may be required to enable the works to be carried out, such as in relation to rights of light, superior landlord consent or any other issues, need to have been dealt with or be in hand.

Finance - the landlord needs to show that he has sufficient funds to carry out the works and also what they will cost. Cost is obviously an important factor as to whether the landlord can show the intention to carry out the works.

Vacant possession - If the landlord requires possession of other properties to carry out a development then he will need to show that he will be able to obtain vacant possession. He will need to show how many tenants occupy the premises and how that occupation will be terminated. On a big development, tenants will look at this carefully to see whether a landlord can actually obtain vacant possession of the whole site.

The further along the landlord is with all of the above and other elements, such as building contracts, procurement and so on, the better and the more likely he will be able to prove his intention to carry out the works and therefore be successful in proving Ground (f).

Summary

In summary, if contemplating redevelopment of a site, to give himself the best chances of success under Ground (f), the landlord should:

  • Draw up initial plans and discuss the proposed works to the holding with his solicitor to ensure that they will be sufficient under the Ground (f) requirements and if not, consider redesigning the works accordingly. The issue of obtaining possession should also be considered.
  • Once the extent of the work to the holding is finalised, the landlord should look to get as many practical elements of carrying out those works in place by the time of the trial.

Generally, if the landlord does all the above, subject to litigation risk, he should succeed regardless of whether he has designed the works simply to get rid of the tenant, even if those works make no practical sense, as long as he can show that there is a genuine and settled intention to carry out those works. Once this is accepted, motive is irrelevant. This is the current position; however, we will have to wait and see whether the Supreme Court's decision changes this when it considers the matter later this year.

This article first appeared in the Property Litigation Column, June 2018. 

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