Dogan & Semali [2005] EWCA Civ 1036
Subject to certain exceptions, the Landlord and Tenant Act 1954 gives security of tenure to tenants of business premises. This means that even when a lease or tenancy comes to an end, a statutory tenancy continues until it is brought to an end in accordance with the Act.
This is done either by a landlord serving a Section 25 Notice or a tenant serving a Section 26 Request. A landlord can only oppose on limited grounds set out in the Act.
This case looks at one of the most common grounds used by a landlord to end a tenancy - namely that when the landlord intends to demolish or reconstruct the premises during the tenancy, this cannot reasonably be done without obtaining possession.
Facts
L owned commercial premises comprising ground floor shops with separate offices above and a car park to the rear. Access to the car park was via a covered undercroft. L wanted to knock units 1 - 3 into one, extend the building into the car park and put a new unit in the undercroft. The new access to the rear would be via a separate private road owned by the local health trust. L had negotiated an "option agreement" for a right of way over the road but the health trust was not obliged to grant the right of way. L served Section 25 Notices opposing new leases under ground (f) but the tenant of unit 1, T, refused to go.
The development itself required planning permission. Permission was initially refused but subsequently granted on appeal. However, one of the conditions imposed was that the new access had to be in place before the development could proceed. Unfortunately for L, no right of way had been granted. The day before the Trial, L sought to introduce new evidence from a planning consultant and put forward an alternative scheme. This new scheme retained the existing access to the rear of the building by not having a new unit in the undercroft. This evidence was admitted. Although planning permission had not been obtained for this alternative scheme, the consultant gave evidence that in his view there was no reason to think that it would not be granted.
Decision
L lost the case. The Judge described L's intention as unsettled and "wishy-washy". He believed that the planners would refuse permission for this alternative scheme. L appealed. The Court of Appeal reversed the decision because the Judge had misunderstood what L had to prove in order to succeed under ground (f). L satisfied the test to implement the development, as it had a reasonable prospect of being able to bring about the desired effect.
Reasonable prospect" does not mean "probability". It is a relatively low threshold. There was no reason to believe the planning consultant's evidence was wrong. In fact, following the Trial but before the Appeal Hearing, L obtained planning permission for the second scheme and this could be (and was) taken into account by the Court of Appeal.
Practical Points
- Ground (f) is often used because it is one of only 2 mandatory grounds. If decided that the landlord has the necessary intention , the Court must dismiss the tenant's application for a new lease.
- Landlords should expect to have to produce compelling evidence that they can overcome any hurdles such as planning permission and finance (though the absence of a planning permission or of a firm offer of finance is not necessarily fatal).
- Although a tenant is entitled to statutory compensation (based on rateable values) this is often of small comfort as the actual loss caused by having to relocate may be a lot more. Tenants need to take a view at an early stage on the prospects of success. Negotiating a managed exit may result in a better settlement than fighting the case to trial.
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