What happens if L recovers possession from T on the basis of a ‘redevelopment’ that never occurs; can T claim compensation?

This is what happened in a recent case where L told T about the planned redevelopment and then served a notice to terminate the tenancy based on the ‘redevelopment’ ground. On the facts, T realised that it would not be possible to remain in possession during the works, and that a court would not grant him a new lease if L did go ahead with the redevelopment. Accordingly, after L had rejected his offer of an increased rent, T vacated the premises and rented elsewhere. But, at the same time, L had been having second thoughts about the redevelopment and decided to accept the advice of an agent that a sale would be better than a redevelopment. However, L did not communicate this to T, who subsequently vacated.

In the old days, T would almost certainly have had no remedy. But, s37A was introduced in 2004. It gives T the right to compensation if they have given up possession ‘by reason of misrepresentation or the concealment of material facts’. On the facts, the CA decided that this case came within the scope of s37A and thus T was entitled to compensation.

Note that the mere fact L serves a notice on T quoting the redevelopment ground will not, of itself, be a sufficient representation. There must be a continuing representation to T if s37A is to apply. Having said that, the CA made it clear that L is not under any duty to provide periodic statements of information so as to update T on L’s state of mind or the progress of the redevelopment plans. Likewise, the mere fact that L explores other commercial options does not mean that he is guilty of misrepresentation. However, the case is a warning to Ls that care is needed. Indeed, the best advice now may be to reconsider the amount of information provided to Ts about L’s plans (ie the more information L gives, the more danger there is that they are making continuing representations – whereas if they simply put the ground in the s25 notice then that will not be a sufficient representation). Claims of this sort will always depend on their own facts. What is clear, however, is that if L definitely changes its mind before T vacates then there is a real risk of s37A compensation having to be paid. See article on ?Inclusive Technology v Williamson [2009] EWCA Civ 718 in [2009] 237 PLJ 21 (access free at www.practicalconveyancing.co.uk).