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The Cavendish Hotels Supreme Court Decision

A Chartered Surveyor’s View Point to Landlords

The Supreme Court has issued its decision on whether a landlord, Cavendish Hotel (London) Ltd, has the right to vacant possession of premises let to the tenant, S Frances Ltd.

The pertinent points from the decision are:

  • The landlord’s intention must not be conditional on whether the tenant chooses to pursue his claim for a new tenancy.
  • The “acid test” is whether the landlord would intend to do the same works if the tenant left the premises voluntarily.
  • The intended works do not need to be financially viable but they need to be of some “utility” i.e. value or usefulness.
  • It’s a reminder also that the works planned have to be sufficient enough to prevent the tenant’s continued occupation.

 

The circumstances, in this particular case, were that the landlord opposed the grant of a new lease of this textiles showroom situated at 80 Jermyn Street London, at lease expiry, on the grounds of  section 30 (f)  of the Landlord and Tenant Act 1954.  Section 30 (f) states that a landlord, can oppose the grant of a new lease because the landlord intends to carry out substantial works of construction that the landlord could not reasonably do so without obtaining possession.

The landlord’s proposed works, so the lower courts said, could not be undertaken whilst the tenant was in occupation.  The landlord therefore won. There is however a “but” and it was a big but!   BUT the landlord, during the lower court proceedings, admitted that it didn’t really want to undertake the proposed redevelopment works; it would only be doing them to ensure that the tenant vacated the premises.  It gave an undertaking to the lower courts that once the tenant vacated it would do the works.  The lower courts decided that the landlord’s motives were irrelevant.

The Supreme Court has over turned that decision up to a point.  It decided,

“Although not directly relevant in itself, the landlord’s motive or purpose may be evidence of (i) his genuine intention to carry out the proposed works and (ii) the conditional character of that intention.  Similarly, a lack of utility of works may allow an inference as to the conditional character of the landlord’s intention”

Some commentators have said that the Supreme Court has placed an even greater hurdle in the path of landlords wishing to oppose the renewal of a business tenant’s lease.  I do not agree.  The whole raison d’etre of the Landlord & Tenant Act is, and has always been, to prevent landlords from “kicking out” business tenants for no good reason. In this case we had a landlord admitting that he “cooked up” a scheme for not renewing the lease. The Supreme Court has bent over backwards to maintain the raison d’etre of the Act and prevented a landlord from transparently driving a proverbial coach and horses through the Act of Parliament.

In my opinion it is, “ladies and gentlemen, as you were”!  The situation is fundamentally the same as before the lower court cases.  So long as you can demonstrate the works have some purpose or utility you should, as a landlord, succeed in gaining possession.  Importantly the Supreme Court has not said that the landlord has to prove that the redevelopment is financially viable.

Incidentally but importantly, on the facts of the case The Supreme Court also decided that the works could be carried out without the tenant vacating so also allowed the tenant’s appeal on this basis.

So what are the lessons?  An “inside the Act” lease is as important as it ever has been for   tenants.  If, as a landlord you wish to carry out works and object to a new business tenancy speak, at an early stage, to an experienced landlord and tenant Chartered Surveyor; certainly when architects are drawing up the scheme.  Even better do so before a prior lease event to discuss the aim of negotiating you out of the clutches of Landlord and Tenant Act.   This enables you to plan with far lower risk.  At Allsop we have, on several occasions, achieved this for landlords.

 

 

Richard Bourchier  is head of Allsop’s  Landlord and Tenant team.  Richard’s specific business activities include lease renewals, rent reviews and negotiating dilapidations.

He is a well respected negotiator, primarily dealing with South East and Central London offices together with large space retail throughout the UK.