Status of the 1954 Act
In March 2023, the Law Commission announced that it would review the 1954 Act – over 20 years since its last review – to “explore problems with the existing law with a view to developing a modern legal framework that is widely used rather than opted out of” aiming to make the legislation “clear” and “easy to use”.
The Law Commission’s consultation paper had been expected by the end of 2023, but is now due to be published “as soon as possible in 2024”.
The fact that the 1954 Act is still even now generating disputes and regular court cases as parties tussle over their respective claims may give the Law Commission food for thought.
Opposed renewals – redevelopment
Two section 30(1)(f) cases in 2023 proved to be cautionary tales for landlords trying to oppose the grant of a new lease by demonstrating their intention to redevelop the property.
In Man Limited v Back Inn Time Diner Limited [2023] EWHC 363 (Ch), the High Court ordered the grant of a new lease, despite landlord opposition.
The tenant, which used the property as an American-style diner, requested a new lease. The landlord opposed on ground (f), arguing that it intended to redevelop the property as a mixed used development.
At the date of the hearing, the landlord’s application for planning permission had been refused. It also failed to disclose evidence of how it would finance the development until the hearing itself, which meant that it was too late to be admitted as evidence.
The County Court Judge reiterated that a landlord’s “intention” to redevelop had two elements – subjective intention and objective intention. While the landlord’s subjective intention was clearly to redevelop the property, it could not demonstrate an objective intention that it would actually be able to do so. On that basis, the County Court ordered the landlord to grant a new lease.
The landlord appealed to the High Court, which upheld the judgment despite the landlord having, by that time, secured planning permission. The evidence on funding was still inadmissible, without which the landlord could not demonstrate that it had a “real chance” of carrying out the development.
It was a similar story in GT Motoring Solutions Ltd & Another v Gareth Sinclair Williams ([2023] EWHC 363 (Ch)), where the landlord (two individuals acting as trustees of a self-administered pension plan on behalf of themselves and their wives) was unable to persuade the County Court that it had the requisite intention to redevelop.
The landlord opposed the grant of a new lease on the redevelopment ground, with a vague idea of building an “age exclusive” apartment scheme, but no real plan for how that would be achieved – whether by selling the property as it was, demolishing it and selling it with planning permission, building out the scheme itself, or entering into a joint venture.
Given the range of different options under consideration, and the lack of any resolution from the trust or any consultation with their wives (who were also beneficiaries of the trust) the landlord could not demonstrate a “firm and settled” subjective intention to redevelop the property.
The landlord also failed to show an objective intention by demonstrating it had a reasonable prospect of being able to carry out the development. It did not submit any evidence as to how the trust would fund the development, that planning permission for the demolition and redevelopment of the property had been applied for – let alone granted - or from any expert regarding the likelihood of securing planning permission.
Finally, because of the lack of a clear plan on timings for planning permission, plus practicalities such as the availability of builders to carry out the works, the landlord could not demonstrate that demolition of the property and the subsequent redevelopment could start on termination of the lease. Its opposition failed, and a new lease was ordered.
As well as providing a useful reminder of the high threshold for demonstrating an intention to redevelop, both of these cases serve as a warning to landlords opposing the grant of a new lease to make sure that they are fully prepared to demonstrate their redevelopment plans well ahead of the hearing. Had the landlord in Man Limited v Back Inn Time Diner provided its evidence on financing the development earlier, it may well have successfully opposed the grant of a new lease – especially as planning permission was later granted, which would likely have influenced the appeal.
Renewal leases: break clauses
2023 also brought us two reported cases, where landlords did not oppose the renewal but sought to include break clauses in the new lease, which was resisted by the tenants. Again, the key issue was whether each landlord could demonstrate the requisite intention.
In B&M Retail Limited v HSBC Bank Pension Trust (UK) Limited ([2023] EWHC 2495 (Ch)), the landlord was able to demonstrate that intention.
The landlord had intended to serve a section 25 notice, opposing the grant of a new lease on ground (f) but, due to a post-room mishap at the height of the Covid-19 pandemic, it had not realised that the tenant had already served a section 26 notice requesting a new lease. The landlord was then out of time to oppose the grant of that lease by serving a counter-notice.
The landlord was compelled to grant a new lease, so the battleground at trial was whether a redevelopment break could be imposed and, if so, at what point during the term of the lease.
The County Court included an immediate break right in the lease, exercisable on 6 months’ notice, which was upheld by the High Court on appeal.
This is an important judgment, showing there is no bar to the imposition of an immediate break. The Court was willing to impose such a clause because of the strength of the landlord’s evidence on its intention to redevelop the property.
While the circumstances behind this case were unusual, it could come to the aid of landlords who have a clear intention to redevelop in the future, but either do not intend to do so immediately, or are not in a position to demonstrate their ability to give effect to that intention at the time of the trial but will be in due course.
At the other end of the spectrum, the landlord in BMW (UK) Limited v K Group Holdings Limited (County Court, Claim No. K10CL172)) was unable to show sufficient intention; it sought a break clause exercisable on year 2 of the new lease on 6 months’ notice on the basis of ground (g) that it intended to occupy the holding to run its own business, though it had no clear plan beyond some form of “car-based business”.
The Judge was unconvinced by the landlord’s evidence of its business intentions, which he described as “imprecise and unclear” and “not evidenced by anything other than some vaguely referenced meetings or discussions”. There was also a suggestion that the idea of a break clause had been arisen for tactical reasons in the proceedings, rather than any genuine intention.
The landlord therefore could not demonstrate a clear intention to use the property to run its own business which, when balanced against the detriment the tenant would suffer if a break were imposed, led the Judge to decline to include a break clause in the new lease.
Tenant fault grounds
The Court of Appeal carried out a comprehensive review of the tenant fault opposition grounds in section 30(1) (a) – (c) of the 1954 Act in Gill v Lees News Limited ([2023] EWCA Civ 1178).
The landlord opposed the grant of a new lease on the basis of the tenant’s breach of its repair and other obligations under the lease and persistent delay in paying rent.
The Court had to consider when it must assess the tenant’s breach. The tenant argued that the trial was the key date and, as it had remedied the breaches by then, a new lease ought to be granted.
The Court disagreed and said, in determining whether a new lease ought to be granted, it was not tied to a single “snapshot”, but could review the tenant’s performance over the whole term of the lease.
While, in this case, the Court granted a new lease on the basis that the various tenant breaches had been remedied, it was clear that this will not always be the case; the court may look at the tenant’s conduct throughout the lease term, not just at the date of the trial. A tenant is not guaranteed a new lease merely by fixing any breaches just before the trial date.
What should we expect for lease renewals in 2024?
None of the points raised in these judgments are new, but they appear to show a subtle re-setting of the balance between landlord and tenant, but only where the landlord can meet the high evidential burden of proof.
While, historically, the courts have arguably given greater weight to the tenant’s right to security of tenure, the B&M case in particular suggests a change in approach. The County Court – as endorsed by the High Court – was clear that “the court will only upset a landlord’s redevelopment ambitions if there is a major factor which points the other way and, whilst the Claimant is correct in that a balancing exercise has to be undertaken, if anything, it is trumped (to a large extent) if a landlord wishes to develop”.
We will watch to see what the upcoming Law Commission Consultation brings, and whether this shift in emphasis, and rebalancing of the parties’ rights, continues into 2024.
An earlier version of this article appeared in EG on 23 January 2024.
Authored by Mathew Ditchburn and Lucy Redman.
