The Supreme Court lands a (soft) blow to landlords opposing tenancy renewals…

Tenants and landlords who are party to Landlord and Tenant Act 1954 (the Act) tenancies should sit up and take note of recent landmark Supreme Court decision, S Franses Ltd v Cavendish Hotel (London) Ltd (2018) UKSC 62.  In short, the decision makes it more difficult for landlords to oppose the granting of a new tenancy on the basis that they intend to demolish or reconstruct the premises. The Supreme Court emphasised that this intention must exist independently of the application to renew. Gone, therefore, is the possibility of landlords claiming they need to carry out works where the real discovered motive for doing so is to get rid of a troublesome tenant.

Opposition to renewal is permitted by law under s30(1)(f) of the Act which provides that a landlord may oppose an application for a new tenancy on the basis that:  “(f) … 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;”

S Franses Ltd v Cavendish Hotel (London) Ltd (2018)

In Cavendish, the tenant, a textile dealership, occupied the premises on the ground floor and basement of a building, the rest of which was used as a hotel. In 2015, the tenant served statutory notices requesting the grant of a new tenancy but the landlord opposed this by serving counter-notices opposing this under s.30(1)(f) on the basis that it intended to demolish or reconstruct the premises and could not reasonably do so without obtaining possession. The proposed works were admitted to have no practical utility and had the sole purpose of obtaining vacant possession. The landlord provided a written undertaking to commence the works as soon as vacant possession was obtained.  The High Court judge decided that the landlord genuinely intended to carry out the works and that the ground of opposition in s.30(1)(f) was satisfied. The matter was appealed and leapfrogged to the Supreme Court.

The Supreme Court observed that the touchstone of s.30(1)(f) was a firm and settled intention to carry out the works and so long as that intention was genuine, it did not matter whether it was reasonable.  Secondly, the landlord’s purpose and motive were relevant for testing whether such a firm and settled intention existed.  In this case the entire value of the works proposed by the landlord was based on the landlord obtaining vacant possession, not from any benefit arising from the reconstruction itself.  The commercial reality was that the landlord was proposing to incur the costs of the works for the sole purpose of obtaining vacant possession.  The Supreme Court decided that this was at odds with sections 30(1)(f) and 31A of the Act (the latter section regarding landlords’ ability to carry out works by exercising a right of entry) which indicated that the landlord’s intention to demolish or reconstruct the premises had to exist independently of the tenant’s statutory claim to a new tenancy, such that the tenant’s right of occupation under a new lease would obstruct the landlord’s intention to demolish or reconstruct the premises.  Lord Sumption stated:

“The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily. [In this case]..the tenant’s possession of the premises did not obstruct the landlord’s intended works, for if the tenant gave up possession the landlord had no intention of carrying them out. Likewise, the landlord did not intend to carry them out if the tenant persuaded the court that the works could reasonably be carried out while it remained in possession. In my judgment, a conditional intention of this kind is not the fixed and settled intention that ground (f) requires. The answer would be the same if what the landlord proposed was a demolition, conditionally on its being necessary to obtain possession from the court.” {emphasis added}

The Court observed that landlords’ motives and purposes can be evidence of the conditional nature of their intention to carry out the works and that where there is a lack of utility to the works, this may help the court arrive at the conclusion that the intention to carry out the works is “conditional”. The Court also observed that the situation becomes more complex if a substantial part of proposed works does not depend on obtaining vacant possession, such that landlords hoping to remove tenants add on spurious additional works requiring vacant possession. The key question in that scenario will be whether the landlord would carry out the latter part of the works if the tenant were to leave voluntarily.  Lord Sumption stated:

“If, however, it is established that, at the time of the trial, were the tenant hypothetically to leave voluntarily, the landlord would not carry out the spurious additional works, then the tenant’s claim to a new tenancy would normally fall to be resolved by reference only to the works which the landlord unconditionally intended.”

Conclusion

So what does this decision mean in practical terms for (a) tenants and (b) landlords?  Well, clearly, tenants will now feel a degree of comfort that landlords are unlikely to successfully oppose tenancy renewals on the basis of reconstruction or demolition works unless these are genuinely intended and not merely to “get the tenant out”.  Landlords on the other hand must now be alive to the fact that unless they can demonstrate that their intention to reconstruct or demolish the premises exists independently of the tenant’s application to renew, their opposition to renewals on this basis could well falter.  They are best advised to record clearly the reasons for any construction/demolition plans, so that they are shored up to defend any accusations levied by tenants wishing to renew that the real reason for proposed works is to acquire vacant possession.  All this may mean that we will increasingly see landlords looking to contract out of the relevant provisions of the Act so that they are able to get vacant possession more easily.