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Is Security of Tenure Dead for Business Tenants?

Security of Tenure is Dead. Long Live Security of Tenure.

Security of tenure is dead, long live security of tenure.The High Court’s recent decision in S Franses Ltd v The Cavendish Hotel (London) Ltd [2017] EWHC 1670 QB has prompted many commentators to announce the end of security of tenure for business tenants.

In this case, the landlord owned the Cavendish Hotel on Jermyn Street in London.  The tenant leased the ground floor and basement of the hotel and had occupied the premises for over 25 years. The lease was coming to an end.  The landlord opposed the renewal of the lease and the tenant applied to the court for a new lease.

The landlord relied on section 30(1)(f) of the Landlord and Tenant Act 1954 to oppose the lease renewal.  Broadly, section 30(1)(f) states that a landlord may oppose an application for a new tenancy on the basis that it intends, “to demolish or reconstruct the premises … or to carry out substantial work of construction … and that he could not reasonably do so without obtaining possession of the holding …”.

PHOTO: Elizabeth Deyong, Head of Commerical Property at Barr Ellison

Elizabeth Deyong is Head of Commercial Property at Barr Ellison Solicitors

The landlord had devised an expensive scheme of construction work with its lawyers so that it would be deemed “substantial” enough to fulfil the requirements of 30(1)(f).  The purpose of the scheme of works was solely to obtain possession of the highly desirable premises and the landlord admitted that the works would not be carried out if the tenant left voluntarily. However, the landlord undertook to the Court that the scheme would be carried out within 12 months after the termination of the tenancy.

The High Court dealt with the following key issues in making its decision:

  • the genuineness of the landlord’s intention to execute the works;
  • whether the landlord could execute the works with the tenant in situ; and
  • the conditionality of the intention, that is, the fact that the works would not be carried out if the tenant left voluntarily.

A clear path to defeating security of tenure?
The High Court found that the undertaking provided by the landlord, along with the factual evidence it submitted, was enough to satisfy it that the intention to execute the scheme of works was genuine.  The High Court also found that the extent of the works was such that it would render the premises unfit for the purposes for which it had been leased.  Consequently, allowing the landlord to carry out the work with the tenant in situ would put the landlord in breach of the implied covenant not to derogate from the grant.  Finally, and most concerning for tenants in desirable properties, the High Court held that section 30(1)(f) is not concerned with why a landlord wishes to carry out a scheme of works.  The High Court held that the section’s only focus is what the scheme of works is and whether the landlord intends to carry it out.  In this case, landlord had been able to demonstrate the scheme of works to be carried out and its intention to do so.  Consequently, the tenant’s application failed.

This decision will be welcomed by landlords of business tenants in prime properties whose leases are coming to an end.  Landlords now have, it seems, a clear path to defeating security of tenure. However, the tenant has been granted leave to appeal so the final situation may change.

For more information on this or any other property matters, please contact Elizabeth Deyong, Head of Commercial Property at Cambridge solicitors Barr Ellison.

Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.

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