Landlord’s intention to redevelop
When does a landlord’s intention to redevelop a property occupied under a business tenancy need to be proven to get possession back? Anna Zatouroff considers a recent Court of Appeal decision.
A landlord can oppose the renewal of a business tenancy which benefits from security of tenure in his section 25 notice under specific grounds listed in section 30 of the Landlord and Tenant Act 1954 (LTA 1954).
One of those grounds is in s.30(1)(f) which states “… the landlord intends to demolish or reconstruct the premises… and he could not reasonably do so without obtaining possession…”. The question for the Court of Appeal in the recent case of Hough v Greathall Limited was: when does a Landlord need to prove his intention to redevelop an occupied business premises: when the notice is first served or at a later stage?
Mr Hough’s case
The tenant in this case asserted that a landlord must prove its intention to redevelop its premises at the date that the landlord served its s.25 notice. The tenant argued that the LTA 1954 is now (since the Regulatory Reform (Business Tenancies) (England and Wales) Order (RRO 2003) came into force in 2004) drafted in the present tense and therefore should be read as putting an immediate obligation on the landlord to prove its intention. A landlord’s notice under section 25 must state the grounds upon which the landlord ‘is opposed’ to the grant of a new tenancy and that it ‘…intends…’ to redevelop. This is in contrast to the wording of the 1954 Act before the RRO 2003 that required the Landlord to state the grounds on which ‘it would oppose’ (our underlining).
However, the Court dismissed the tenant’s appeal and kept the understanding of the law on this point unchanged. The differences introduced by the RRO 2003 were to change only the procedure of notices and counter-notices and did not accelerate the timing of the burden on the Landlord to prove its intention to when the section 25 notice was served. The date to prove that is still the date of the trial.
The purpose of a section 25 notice is to inform the tenant of the arguments upon which a landlord will rely upon at a future hearing. A landlord can only realistically prove its intention at a subsequent hearing.
What are the consequences?
While this case was made (and failed) on the basis of a seemingly minor change of tense in statutory drafting, had the tenant’s appeal been successful it would have major implications for landlords’ attempts to rely on their intention to redevelop property in successfully opposing the renewal of business tenancies. Redevelopment plans are rarely worked out so far in advance. It would also have made much more difficult the common situation where a landlord knows that its site is ripe for development but intends to serve notice first and then sell to someone else to do detailed design, to get planning permission and to do the work.
Landlords will be reassured by the outcome of this case: Tenants will need to wait until trial to attack the landlord’s proposals and that may be too long to hang around commercially.