Senior solicitor Julian Spence, in our Commercial Property team, explains how a landlord may be able to oppose a lease renewal based on the intention to develop.
A tenant has a right to a new lease at the end of the contractual term if Part II of the Landlord and Tenant Act 1954 (“the 1954 Act”) applies to the tenancy and the lease has not been contracted out of the security of tenure provisions contained in the 1954 Act.
A protected tenancy can be terminated in various ways. Amongst other methods of termination, it is possible for a landlord to oppose the renewal of a protected tenancy provided the landlord specifies a statutory ground for opposing renewal and does so with good faith. There are seven statutory ground of opposition. This can either be done in a landlord’s Section 25 notice under the 1954 Act or in a counter-notice if the tenant has already served a Section 26 request under the 1954 Act.
If the landlord successfully opposes renewal, the tenant is entitled to compensation based on the rateable value (or in some cases twice the rateable value) of the Premises if the landlord establishes one of the “no fault” grounds. There is no right to compensation in the “fault” grounds.
One of the “no fault” grounds is Section 30(1)(f) of the 1954 Act intention to develop. Demonstrating this intention is not straightforward and there have been a number of cases in this area.
In the case of S Frances Ltd v The Cavendish Hotel (London)  ER (D) 19 (Dec), the Supreme Court held the landlord had to demonstrate, in addition to the subjective and objective elements of intention, that its intention to undertake works was held independently of the tenant’s right to a new tenancy. It was held that a conditional intention to redevelop is not the fixed and settled intention that ground (f) requires.
The S Frances case was considered further in the case of London Kendal Street No3 Ltd v Daejan Investments Ltd  Lexis Citation 76, and the judgment was dated 16 July 2019. In the latter case it was held that the landlord had the requisite intention under Section 30(1)(f). Although London Kendal Street was only a County Court judgment, it is the first reported case the S Frances case.
The law in this area is complicated, and each case will turn on its own facts. The landlord must be able to demonstrate a genuine intention to redevelop that is independent of the tenant’s statutory right to a new tenancy in order to be successful in opposing renewal under Section 30(1)(f) of the 1954 Act.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.