Contrived Developments – the easy way to remove commercial tenants?
The Landlord and Tenant Act 1954, having been heavily revised over the years, has rarely been the focus of high profile litigation in recent times. However, the case of S Franses Ltd v The Cavendish Hotel (London) Ltd [2017] EWHC 1670, decided in the High Court earlier this year may spark change, as landlords test the limits of the Act.
Facts
The landlord in the above case is The Cavendish Hotel (London) Limited, owner of The Cavendish Hotel in Westminster and the tenant, S Franses Ltd is a textile dealer, also based in Westminster. The tenant was fortunate enough to have a protected tenancy under the Act and, in seeking a renewal of its lease in 2015, it was surprised to learn its application was refused by the landlord.
Theory
The refusal was based upon ground (f) of section 30(1) of the Act, that the landlord wished to carry out substantial construction work to the property that it could not reasonably do so without possession. Historically, this ground has been seen as appealing to landlords seeking to remove tenants either by contemplating a potential scheme (and not following through) or by carrying out minimal works which would not have necessarily required vacant possession. Usually, the courts have been particularly unreceptive to such landlords’ schemes however, seeking to maintain a careful balance of power between landlords and commercial tenants. This was seemingly until the decision in S Franses, earlier this year.
Decision
The development scheme planned by the landlord, whilst stopping short of being entirely fictional, was completely contrived by the landlord and its solicitors with the sole aim of opposing the tenant’s new lease under ground (f ) rather than because genuine works were necessary or improvements were planned. The planned works involved the lowering of the floor of part of the demised area along with the repositioning of an internal wall and smoke vents and provided no practical or economic benefit to the landlord save for the fact it could use them as a tool to oppose the tenant’s lease renewal; it was even confirmed during cross-examination that if the tenant left voluntarily, the works would not be carried out. Despite this quite open use of guile by the landlord, the High Court found in its favour, entitling the landlord to vacant possession, as it desired.
Consequences
What is seen as a universally unfair decision here may be a useful tool for landlords looking to deprive tenants of their security of tenure under the Act and seek a more desirable tenant on more favourable terms. If this seems like an appealing option to oppose any further lease renewals it would be best to act quickly – recent updates suggest that S Franses have been given leave to appeal directly to the Supreme Court. Given the nature of the decision (especially the conduct of the landlord and its solicitors in the case) and how it can be seen to undermine the spirit of the Act, which was to give business tenants substantial security of tenure to protect the operation of their businesses, it is likely this decision could be reversed before long.