The Landlord and Tenant Act states that a Landlord can refuse renewal if he intends to carry out redevelopment or substantial reconstruction, and could not do so without vacant possession of the entire holding, or substantial proportion thereof.
Until recently, most Advisors verily believed that a Landlord could not refuse a renewal on grounds of a bogus scheme, designed specifically to satisfy conditions of the Act.
However, In the recent case of S Franses Ltd v The Cavendish Hotel (London) Ltd, the Judge decided that, as long as a Landlord shows intention to redevelop, it matters little whether his scheme is financially viable.
The Court of Appeal gave the Landlord possession, even though he had stated that he would prefer not to carry out the work if the Tenant was refused a new lease, which suggested the scheme was unviable.
If this judgment is not reversed, it could lead to Landlords assessing open market reletting opportunities, as against renewal, and negotiating significantly better terms with new operators in a free market, rather than a protected renewal negotiation with the existing Tenant.
Restauranteurs could lose their leases on expiry after investing considerable time and money building a reputable business, and retailers could see the investment they have made in fit out and shop frontage being lost to the Landlord.
Tenants should do their research on potential Landlords who act in this manner and avoid.