Commercial Property Partner Hannah Bambury discusses new guidance on when commercial landlords can use ‘redevelopment’ to get possession at the end of a lease.
In leases, the Landlord and Tenant Act 1954 will provide security of tenure for business tenants, unless the lease is contracted out of the Act. Security of tenure means the tenant will have a statutory right to renew its tenancy on similar terms when the current lease expires, which can cause serious issues for a landlord seeking to recover possession of the property.
If the lease has not been contracted out, the landlord will only be able to oppose renewal in a limited number of circumstances. One of the most common grounds for opposing renewal is the redevelopment ground: ‘on 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 or part thereof that he could not reasonably do so without obtaining possession of the holding.’
It is up to the landlord to prove they have the intention to redevelop the premises. This intention must be more than a simple contemplation and the landlord must be able to evidence:
- a fixed intention to proceed with the works;
- that they have thought about any issues that may arise; and
- there are not too many hurdles to overcome.
As always, it is better to be over prepared when considering using this ground. However, a landlord does not need planning permission or building contracts in place.
The courts have recently considered the extent of a landlord’s intention to redevelop in order to satisfy this particular ground. In S Franses Ltd v The Cavendish Hotel (London) Ltd, the landlord devised works which would serve very little purpose and had been designed purely to meet the requirements of the redevelopment ground. For example, the works included:
- repositioning smoke vents for no reason;
- demolition of an internal ground floor wall followed by its immediate replacement; and
- artificially lowering part of the basement floor, creating an impractical stepped floor.
The landlord admitted the works would not be done if the tenant left voluntarily, thus admitting the works were only proposed for the purpose of citing the redevelopment ground, so as to gain possession of the property. The Supreme Court decided a conditional intention to redevelop, conditional on whether the tenant would leave voluntarily or not, was not sufficient to establish ground for possession. The new test is therefore: ‘whether the landlord would intend to do the same works if the tenant left voluntarily.’
This decision may see more tenants questioning the extent of the landlord’s intention to redevelop and asking for further evidence, therefore imposing a greater burden on landlords who wish to recover possession of their property.