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To coin Pablo Picasso’s words “What one does is what counts - not what one had the intention of doing”, has never been truer says commercial property agent Prop-Search, as the Supreme Court rules on one of the most significant property law cases in many years.
In the case of S Franses Limited v Cavendish Hotel (London) Limited, the Cavendish Hotel, located near St James' Park in West London, had refused a tenant’s request for a lease renewal - on the ground and basement floors of its hotel - on the basis that it wished to carry out redevelopment works under Section 30(1)(f) of the Landlord and Tenant Act 1954. The tenant was S Franses Limited, the well-known and historic textile dealership and consultancy.
In short, Section 30(1)(f) of the 1954 Act entitles a landlord to refuse to grant a new lease to a tenant on the grounds that it intends to carry out works to the premises. Before this case, the landlord only needed to demonstrate a firm and settled intention to carry out the works and a reasonable prospect of carrying out that intention.
In this case, the Cavendish Hotel devised a disruptive £920,000 scheme with the sole purpose of obtaining possession to satisfy ground (f). It was admitted that the proposed works would not be carried out if the tenant left voluntarily, but nonetheless gave an undertaking to the Court, that it would to carry out all of the works if vacant possession were ordered. The works would prepare the premises for conversion into two retail units for which planning permission would also be needed and the landlord intended to proceed with the works regardless of whether it could obtain planning permission and even if the works would have to be undone or reversed.
Samantha Jones, an Associate Director at Prop-Search, said: “Previously, a landlord's motive was not considered relevant to ground (f). However, the Supreme Court has held that the absence of any other motive, but to remove the tenant, was evidence that the landlord did not have the 'firm and settled intention' required to satisfy ground (f). Instead, it had merely a conditional intention in that it only intended to carry out the works in order to satisfy ground (f), but would not do so if the tenant left voluntarily.”
Ground (f) is probably the most used ground of opposition to a request by a tenant under the 1954 Act for a new tenancy. It is a long established tactic for landlords - even those with genuine motives - to 'beef up' their programme of works by adding more material alterations, to ensure that they satisfy the substantiality requirement of ground (f). However, following this judgment, the tenant can challenge whether the landlord has the requisite intention to carry out those additional aspects of the works, based on whether the landlord's sole motive for those aspects is to ensure ground (f) is satisfied. If a tenant were to be successful, those aspects of the works would be disregarded by the Court.
Samantha Jones concluded: “The ruling provides a new basis for a tenant to challenge whether its landlord's proposals are conditional and may increase the tenant's chances of remaining in occupation of its business premises. On the flip-side, landlords will need to consider their position more carefully before seeking to refuse a tenant a new tenancy on the grounds of redevelopment."
Further information or advice can be obtained from Prop-Search - Tel: 01933 223300 / 01604 492000 or its website: www.prop-search.com