Since the introduction of the Landlord and Tenant Act 1954, commercial Tenants have benefited from ”security of tenure”, which means they have the statutory right to renew on expiry. Unless the parties have ‘contracted out’ of the Act’s provisions relating to renewal.
But, what if the Landlord states that he wants to redevelop?
In the recent case of S Frances v The Cavendish Hotel (London) Limited, The Cavendish Hotel (London) Ltd looked to satisfy section 30(1)(f) of the Landlord and Tenant Act 1954, which allows a Landlord to oppose the renewal of a tenancy if, on the termination of the current tenancy, the Landlord has intentions to demolish, reconstruct, or carry out substantial construction work to a substantial part, or whole, of the premises.
However, The Cavendish Hotel (London) Ltd only sought to satisfy ground (f) based on a scheme of works, which was specifically created to meet the necessary criteria of ground (f) in order to remove the Tenant. The works had no commercial or practical purpose and were only designed in order to gain vacant possession.
This case has highlighted that, when a Landlord wants vacant possession of a commercial property, and he does not want to renew a Lease with his Tenant, not all Landlords will tell the truth about their intentions. We have seen many Landlords propose schemes that they have no intention of carrying out, once they have secured vacant possession.
Thanks to this case, that is now a thing of the past.
There is now an Acid Test, determined in favour of the Tenant by the Supreme Court, who overruled the first judgement that the Landlord could seek vacant possession on a scheme he did not really want to carry out.
The Acid Test is abbreviated to these words;-
Would the Landlord carry out the same works as he proposes, if the Tenant left voluntarily?
If the answer to this is no, then a Tenant has the right to renew.
Despite this clarification in Law, a lease expiry is still one of the most complex negotiations in commercial property.
The tactics involved are numerous and often beneficial to Tenants.
Tenants should seek renewal advice from their Commercial Property Consultant and/or Lawyer, at least one year before expiry, in order to ensure they obtain a new Lease.