Landlords seeking to obtain possession of a tenancy protected by Part II of the LTA 1954 will now need prove that they would have followed their proposed scheme of construction or redevelopment (under ground F) or occupy the holding for the purposes of their own business (under ground G) even if they did not need to make out the test in order to evict the tenant. The decision means that proposals ‘contrived’ for the purpose of obtaining vacant possession will be scrutinised and ultimately rejected by the court. Landlords, tenants and their professional advisors will now have to analyse ground F and ground G cases through a finer prism, with the Supreme Court acknowledging that more cases will go to disputed hearings as a consequence of their ruling.
The test
Tenancies protected by Part II of the LTA 1954 can only be brought to an end in a number of ways prescribed by the Act. For a landlord to secure possession following the end of the contractual term, he or she must establish at least one of the grounds in section 30(1). To satisfy section 30(1)(f), the landlord must show that “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”. The key word in the S Franses Ltd case was ‘intends’: the landlord has to prove (i) that it has a genuine intention to carry out qualifying works (the subjective limb); and (ii) that it would practically be able to do so (the objective limb). The test for intention is the same in respect of ground G.
What if, however, the scheme the landlord has proposed would not, in fact, have been adopted if the tenant had surrendered his or her holding voluntarily, and it is in fact contrived to make out the requirements of grounds F or G? This was the issue that the Supreme Court faced.
The facts and the appeal
The facts in the S Franses Ltd case were especially stark. The landlord’s principal witness confirmed that the scheme was “all there is to it.” As the landlord’s principal witness put it, the third scheme was “designed purely for the purpose of satisfying ground (f)”: there was no other economic motive save for obtaining vacant possession.
As Lord Sumption noted at [6], “It is common ground that the proposed works had no practical utility… The sole purpose of the works was to obtain vacant possession”. The judge at first instance found that the landlord genuinely intended to carry out the works if they were necessary in order to get rid of the tenant, but that it did not intend to carry out the works if it were not necessary to do so for that purpose. He found that the landlord genuinely intended to carry out the works and that ground (f) was made out. He therefore declined to order a new tenancy. On appeal to the High Court, Jay J agreed, but gave permission for a leap-frog appeal to this court.
What did the Supreme Court decide in S Franses Ltd v The Cavendish Hotel (London) Ltd?
The two-part test of intention finds its provenance in the Court of Appeal decision in Cunliffe v Goodman [1950] 2 KB 237. Lord Sumption developed the test further, however: he stated at [17] that “This appeal does not, as it seems to me, turn on the landlord’s motive or purpose, nor on the objective reasonableness of its proposals. It turns on the nature or quality of the intention that ground (f) requires.” He decided that the test of intention in the statutory provisions exists independently of the tenant’s statutory claim to a new tenancy. What he styled the “acid test” was “whether the landlord would intend to do the same works if the tenant left voluntarily”. A conditional intention (so that the landlord did not intend to do the works if the tenant left voluntarily) was not enough to satisfy ground F.
In his supporting speech, Lord Briggs attempted to focus the possible lines of attack that a tenant may deploy. At [31], he commented that “Recourse to an examination of motive or purpose does not mean that a desire to remove the tenant will always, or even usually, disqualify the landlord from resisting the grant of a new tenancy under section 30(1)(f). An intention to demolish and/or redevelop business premises is very frequently influenced by commercial considerations which include the departure of the tenant”. Despite this warning, it is likely that tenants will attempt to launch a multi-spectrum attack on the subjective limb of the test of intention, broadening the scope and increasing the length of oral evidence.
Analysis and observations
It will now be more tempting for a tenant to test the landlord’s scheme at trial, to try to probe its underlying motivations. Lord Briggs considered, before ultimately rejecting, the argument that the exercise the court now has to carry out might very well become forensic and counter-factual: the point is, the tenant is in the holding and has to be got out. The Supreme Court also left open the issue of ‘mixed intentions’, where a landlord both wants to carry out the development, but has tweaked its details to make out the statutory test. Unhelpfully, Lord Sumption at [20] stated that “the answer is likely to depend on the precise facts”, which in this author’s opinion is a cipher for a series of appeals to the High Court and Court of Appeal.
About the author
David Sawtell is the co-author, along with Richard Hayes, of ‘A Practical Guide to the Landlord and Tenant Act 1954: Commercial Tenancies’, published by Law Brief Publishing and also available at Amazon and in legal bookshops. David was also the co-author, along with Alice Lane, of ‘Planning the Use it Yourself’, Estates Gazette, 21 January 2017, 69 (dealing with the LTA 1954, section 30(1)(g) and planning issues). As part of his construction and real estate practice, David is regularly instructed in development cases involving grounds F and G, especially those involving more complicated construction and planning issues.
David regularly presents seminars to solicitors and property professionals on the LTA 1954 and the development issues that it poses. If you would like to hear his new hour-long workshop at your offices on the S Franses Ltd case, the issues that it raises for landlords, and the evidence that a court is likely to consider to be decisive, please do not hesitate to contact his clerk Clifford Alderson (cliff@lambchambers.co.uk ).