Landlords: spurious redevelopment schemes

Landlords and tenants will be familiar with the security of tenure provisions contained in the Landlord and Tenant Act 1954, which give tenants the right to renew their leases on expiry. Landlords can only object to a renewal on a limited number of grounds. One of those most frequently relied on by landlords is ground (f), which is that the landlord intends to demolish or reconstruct the premises subject to the tenancy, and cannot do so without obtaining possession from the tenant.

Case law has established that the landlord must have a firm and settled intention to carry out redevelopment works before ground (f) can be relied upon. Strong evidence is usually required to demonstrate this – the landlord will need to show that it has, for example, all necessary planning permissions and finance etc in place, or at least that advanced progress has been made to obtain them.

In an important decision, the Supreme Court has recently considered in the case of S Franses Ltd v Cavendish Hotel (London) Ltd whether a landlord can rely on ground (f) where the only purpose of the proposed redevelopment works was to allow the landlord to obtain vacant possession of the premises concerned. Essentially, the landlord designed a spurious redevelopment scheme solely in order to defeat the tenant’s claim to a new lease.

The Supreme Court decided that the landlord’s intention was the key factor. The landlord’s motives were not of themselves relevant, and there was no requirement for the landlord to show that the proposed works were reasonable or commercial. However, the Court decided that the landlord must have an unconditional intention to redevelop, whether or not the tenant seeks a new lease. The landlord in this case had only a conditional intention to do the work, because it admitted that if the tenant were to leave the premises voluntarily, the development would not have gone ahead.

Landlords considering redevelopment should note they must have a genuine intention to carry out redevelopment works before they can rely on ground (f). Tenants may be more inclined to challenge landlord opposition on the redevelopment ground in light of this decision.