Commercial landlords should consider their position more carefully before seeking to refuse a tenant a new tenancy on the grounds of redevelopment, according to Thursfields Solicitors.
The warning from Ruth Ellway, a senior associate solicitor in Thursfields’ Dispute Resolution department, comes after a judgment delivered by the Supreme Court last month on the case of S Franses Ltd v The Cavendish Hotel (London) Ltd.
The Cavendish Hotel, located near St James’ Park in West London, had tried to remove a business tenant occupying the ground and basement floors on the basis that it wished to carry out redevelopment works under section 30(1)(f) of the Landlord and Tenant Act 1954 (1954 Act).
However, the proposed works had no logical or practical purpose but were solely designed to remove the tenant from the premises.
Ms Ellway, who specialises in commercial property disputes at Thursfields, said: “This was one of the most significant property law cases in many years.
“In short, the 1954 Act gives business tenants a right to renew their lease when it comes to an end. Landlords who do not wish to grant a renewal lease can only do so on certain limited grounds.
“One of those grounds is where landlords wish to redevelop the premises. In this case the Supreme Court ruled that the landlord had contrived a scheme of works that had no practical benefit other than to get rid of the tenant and to avoid having to grant a new lease.
“The hotel’s intention to carry out the works was conditional in that it only intended to undertake them if it was necessary to get the tenant out, and not if the tenant left voluntarily.
“The court decided in this case that it was not sufficient for the landlord’s intention to be conditional, but that it must intend to carry out the works whether or not the tenant voluntarily vacated.”
Ms Ellway said that landlords who have genuine redevelopment plans may not need to worry, but others who wish to design a scheme that has no other purpose than to get rid of the tenant may need to go back to the drawing board.
She added: “While the case may be good news for tenants, it could mean that landlords may be more inclined to only grant tenancies which ensure they can obtain possession at the end of the term.”