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Important 1954 Act decision

On 5 December 2018, the Supreme Court (Lady Hale, Lord Sumption, Lady Black, Lord Briggs, Lord Kitchin) handed down their judgment in S Franses Limited v The Cavendish Hotel (London) Ltd judgment here

The appeal raised two issues concerning the proper interpretation of s s 30(1)(f) of the Landlord and Tenant Act 1954, namely:

  1. Whether a landlord which intends to carry out works if, and only if, those works are necessary to satisfy s 30(1)(f), has the requisite intention for the purposes of ground (f); and
  2. Whether a landlord whose sole or predominant commercial objective is to undertake works in order to fulfil ground (f) and thereby avoid the grant of a new lease to the tenant, has the requisite intention for the purposes of ground (f).

The facts of the case were that a landlord had opposed an application for the grant of a new tenancy on the ground that it intended to carry out works said to within s.30(1)(f) on the termination of the current tenancy. The landlord gave an undertaking that the works would be carried out if possession were granted. The courts below held that the landlord had established the requisite intention despite the fact that it accepted that the works it intended to carry out had no purpose other than to get rid of the tenant, and would not be undertaken if the tenant were to leave voluntarily.

The Supreme Court held that, although (1) the landlord’s purpose or motive are irrelevant save as material for testing whether a firm and settled intention exists for the purposes of the s.30(1)(f) test; (2) as a statutory interference with the landlord’s proprietary rights, the protection conferred by the 1954 Act should be carried no further than the statutory language and purpose require, conferring “no more than a qualified security on the tenant”; and that therefore (3) the landlord had a right to demolish or reconstruct his property in whatever way he chose at the expiry of the term; those considerations did not avail the landlord on the facts of the present case.

The reason for that was put shortly by Lord Sumption as follows:

“This appeal does not, as it seems to me, turn on the landlord’s motive or purpose, nor on the objective reasonableness of his proposals. It turns on the nature or quality of the intention that ground (f) requires. The entire value of the works proposed by this landlord consists in getting rid of the tenant and not in any benefit to be derived from the reconstruction itself. The commercial reality is that the landlord is proposing to spend a sum of money to obtain vacant possession. … The result is that no overriding interest of the landlord will be served which section 30 can be thought to protect. The right to obtain vacant possession on the expiry of the existing term, which is all that the landlord is getting for his money, is not in itself an interest protected by section 30. On the contrary, in a case where the parties have not agreed to contract out of statutory protection, it is the very interest that Part II of the Act is designed to restrict.”

Lord Sumption went on to hold that the drafting of s.30(1)(f) and s.31A showed that the landlord’s intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim to a new tenancy, so that the tenant’s right of occupation under a new lease would serve to obstruct it. The landlord’s intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim. The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.  He added:

“On the facts found [at first instance], 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 he 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.”

Lord Sumption also dealt as follows with a principal plank of the landlord’s submissions, to the effect that such a ruling would be unworkable in practice, because county courts would face an extra layer of difficulty in attempting to divine which works were “conditional” in this sense, and which were not:

“More complex issues would arise if the landlord intended to carry out some substantial part of the proposed works whether or not it was necessary to do so in order to obtain vacant possession from the court, and part of them only if it was necessary in order to gain possession. This might arise if, for example, the unconditional part of the landlord’s plan was insufficiently substantial or disruptive to warrant the refusal of a new tenancy, so that spurious additional works had to be added for the sole purpose of obtaining possession. In a situation like that, the answer is likely to depend on the precise facts. 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.”

Lord Briggs agreed with Lord Sumption’s reasoning (as did the other members of the Court), but added that in many cases, the testing as to whether the landlord’s intention was conditional would “probably give rise to factual questions of some nicety, incapable of resolution by the proffer of a simple undertaking to the court, as happens at present”, and that that consideration “may introduce an element of complexity and expense into proceedings in the County Court which, for many years, have yielded to a simple technique for speedy resolution.”

Lessons for landlords:

  1. This decision will require much thought to be given to lease termination, both at the date of grant of a tenancy, and at its end.  Landlords must be aware that henceforth a redevelopment scheme with some doubts as to its substantiality cannot simply be bulked out by unnecessary works in order to put the landlord into an unassailable position at trial. The question now is simply: would I carry out those works if I got the premises back without having to oppose a renewal?
  2. Landlords who wish to be sure of obtaining vacant possession at lease end will wish to consider whether offering a contracted-out tenancy might not be a safer solution.
  3. Landlords who have a perfectly sound redevelopment proposal which they wish to carry out in any event should have nothing to fear from this decision – but they should now expect a barrage of cross-examination as to their genuineness, together with opposing expert evidence showing different ways in which their works could be done (matters which in the past were largely irrelevant).  The costs of opposed renewal proceedings will be likely to increase as a result.

Lessons for tenants:

  1. The position of tenants at lease end under a protected tenancy may now be more secure, because this judgment gives tenants the right to test whether their landlord’s s.30(1)(f) proposal is conditional.
  2. Tenants should however be wary of assuming that this decision is all good news.  It will be likely to add to the cost and length of contested renewal proceedings (with ramifications not merely for ground (f), but also ground (g)), and many tenants will be on uncertain ground in seeking to prove their case in any event, given that the reason the landlord wishes to do the works it professes to do will be a subjective matter that may be difficult to disprove at trial.
  3. Finally, tenants may find that the unintended consequence of this decision is that many landlords, previously content to rely upon the well-hallowed approach of the Courts to ground (f), may now insist upon avoiding the new uncertainty by requiring the tenancy to be contracted out of the protection afforded by the Act. 

Guy Fetherstonhaugh QC of Falcon Chambers and Nicholas Taggart of Landmark Chambers, instructed by Maples Teesdale, acted for the Respondents.

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