A recent Court of Appeal decision has been welcomed by landlords who have an intention of opposing a tenant’s request for a renewal lease. Here, commercial property expert Eleanor Cornthwaite explains the case in detail and the implications which could have affected thousands of landlords across the UK.
As commercial landlords may know, a tenant who occupies premises for business purposes will often acquire security of tenant pursuant to Part II of the Landlord and Tenant Act 1954 (LTA 1954) unless the lease is contracted out. If a tenant has security of tenure it means that he/she has a right to a renewal lease on expiry of the previous contractual term.
Landlords may seek to terminate the lease or oppose a request for a renewal lease on the basis of certain limited grounds. Once a landlord has decided that it wants to terminate or oppose the grant of a new tenancy it must serve a Section 25 Notice or a counter-notice within two months if the tenant has served a Section 26 Request setting out the grounds of opposition.
The legal process of opposing lease renewal
The seven grounds of opposition are contained within Section 30(1) of the LTA 1954. Section 30 (1) (f) states that a landlord may oppose the grant of a renewal tenancy on the basis that “ on the 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 and that he could not reasonably do so without obtaining possession of the holding.”
A case which challenged the law
The tenant argued in the case of Hough v Greathall Ltd  EWCA Civ 23 (“Hough”) that the changes imposed by the Regulatory Reform Order 2003 (RRO 2003) meant that the legal position concerning when the landlord must have the necessary intention to satisfy ground 30(1)(f) had changed.
The RRO 2003 changed the wording of the original Section 25 Notice from “would” to “is” opposed. The tenant therefore argued because it is now present tense the landlord has to show an intention to redevelop at the date of service of the Section 25 Notice.
The court was satisfied that the landlord had to establish the necessary intention to demolish and reconstruct the premises at the date of the hearing which was a major relief for thousands of landlords across the country. If the date had changed, there would have been huge consequences including the need to formulate plans and gather evidence way in advance of serving a Section 25 notice.
Key learnings from the case
The ruling re-affirms the position that landlords need only demonstrate the requisite intention to redevelop at the date of the court hearing. In practice, this means that landlords who wish to oppose renewal on the basis of intended redevelopment will have several months or possibly longer following service of the Section 25 Notice to gather the requisite evidence to illustrate a firm and settled intention to redevelop.
Landlords who require advice on this topic or any other commercial property matter can contact a member of WHN’s dedicated commercial property litigation department which specialises in commercial property disputes of all kinds.
Contact either Daniel Long or Eleanor Cornthwaite at our Bury office on 0161 761 4611