A landlord of business premises seeking to oppose renewal on the basis that it proposes to redevelop those premises must satisfy the requirements set out in paragraph (f) of s30(1) of the Landlord and Tenant Act 1954 (see box opposite). The landlord’s intention is to be judged at the date of the court hearing. If this ground of opposition is established, then – subject to the tenant successfully invoking s31A of the Act – the court may not make an order for the grant of a new tenancy. There is no discretion vested in the court in this case.

The statutory wording has been considered over the years in a raft of decided cases, and has been the subject of much judicial gloss. One particular focus of attention has been on the meaning of the word ‘intends’. It is now clearly understood that there are two aspects to this, one subjective and one objective. Ward LJ summed up the situation pithily in Zarvos v Pradhan [2003] when he said:

… hence the first element of the subjective intention, the genuine settled commitment to the project, and the second, a check on the reality, which is demonstrated by showing, objectively, that there is a real possibility of carrying it into fruition. Pie in the sky will not be enough.

The present case, Dogan v Semali Investments Ltd [2005], involved the court looking both at the landlord’s subjective intention and at an objective assessment of the realistic prospects of that intention being implemented. It is necessary to set out the facts, and the events as they unfolded, in some detail.

The facts

The tenant occupied a ground-floor unit within a building under a lease that expired on 23 March 2004. He used the premises as a café and restaurant. There were two further ground-floor units within the building, with independently accessed offices on the upper floors. The building fronted onto a public highway. At the rear of the building there was a car park. This was served by an undercroft running through the building from the public highway. The whole was in the ownership of the landlord, a BVI company. The tenant applied to the court for the grant of a new tenancy of his unit in April 2004. The landlord opposed the application on the paragraph (f) ground, asserting that it intended to redevelop the whole.

A year earlier, the landlord had applied to the local planning authority for planning permission to reconstruct the ground-floor units as one, to extend the newly formed unit into the car park and to build an entirely new unit within the undercroft. This would have entailed obtaining a right of access to the car park over an adjoining private road owned by the local NHS Trust. Under an existing agreement, it was entirely up to the NHS Trust to decide by 20 November 2007 whether or not to grant such right of access.

In September 2003 the local planning authority had refused to grant planning permission. The landlord appealed to the Secretary of State, whose inspector held a hearing into the appeal in May 2004. Later that month, the inspector granted planning permission for this original scheme, subject to a condition that the development could only proceed if the landlord secured the right of access over the adjoining private road.

Pre-trial

A trial of the preliminary issue, namely whether the landlord had satisfied its ground of opposition, was ordered in the County Court in June 2004. A witness statement, submitted in July 2004 by the landlord’s agent, referred to the grant of planning permission on appeal but made no reference to the condition imposed by the inspector in relation to access over the adjoining private road. A further witness statement was submitted by the agent in September 2004, exhibiting the agreement with the NHS Trust, and stating that, if access could not be obtained, the works would nevertheless proceed on a reduced basis, namely without the construction of a new unit within the undercroft.

There appeared to have been an assumption on the part of the landlord at that time that no new planning permission would be required for this reduced scheme. No further planning application was made prior to the trial.

Shortly before the trial, the tenant was furnished with evidence of board resolutions by the landlord, including one to redevelop its property in the manner envisaged in these two witness statements.

The trial

At the trial, evidence was given to the effect that funding was available for redevelopment and that an architect and a building contractor had been identified. A report by the planning consultant who had advised the landlord in relation to the planning application and the planning appeal was submitted at the last moment. Attached to the report was a plan showing refinements amounting to a slight variation to the reduced scheme. The planning consultant also gave oral expert evidence to the effect that planning permission for the varied reduced scheme would be likely to be granted, and should be achievable within eight weeks of submission of an application.

The first instance decision

In relation to subjective intention, the judge seemed concerned that the landlord’s desire appeared settled and firm at the outset, but that it had become unsettled and ‘wishy-washy’ later, and only matured properly on the day of the hearing. He appeared to take the view that the real intention of the landlord was to carry out the original scheme for which planning permission had been granted. In relation to the objective test, however, the judge appears to have considered the varied reduced scheme but then declined to accept the view of the landlord’s planning consultant that planning permission would be likely to be granted for this. He made an order (effectively a declaration) that the landlord had not satisfied its paragraph (f) ground of opposition. He also refused leave to appeal.

Subsequent events

On a consideration of the documents, leave to appeal was granted by Neuberger LJ. The landlord appealed to the Court of Appeal. In April 2005, the local planning authority granted planning permission for the varied reduced scheme, subject to conditions that were either in standard form or innocuous. The appeal was heard in August 2005.

The appeal decision

The Court of Appeal unanimously allowed the appeal, and discharged the declaration made by the original judge.

On the question of whether the landlord’s intention was firm and settled, Sir Martin Nourse said that if the evidence at the trial established the necessary intention, it would not matter that there had been one or more different intentions beforehand. Furthermore, the board resolutions were to be interpreted as extending to the varied reduced scheme. Accordingly, on the evidence, the judge could only have properly concluded that the landlord had a fixed and settled desire to implement that scheme.

As to whether there was a reasonable prospect of the landlord bringing about its desired result, Sir Martin said that this was reduced in this case simply to the question of whether there was a reasonable prospect of obtaining planning permission. In his view, the judge had wrongly preferred his own assessment of whether planning permission was likely to be granted to that of the landlord’s planning consultant. The judge should have concluded that there was a reasonable prospect of planning permission being forthcoming.

Sir Martin then went on to say that the subsequent grant of planning permission in April 2005 was strongly confirmatory of the view that the judge’s conclusion on the evidence before him was wrong and ought to be reversed. It had been confirmed both in Accountancy Personnel Ltd v Salters’ Company [1972] and Gatwick Parking Services Ltd v Sargent [2000] that the Court of Appeal was entitled to take into account a planning permission even though it had not been granted by the date of the hearing. (The latter of these two cases was concerned with the paragraph (g) ground of opposition, but that makes no significant difference.)

Finally, in explaining why the judge had not realised how low a hurdle the test of reasonable prospect of planning permission being granted is, Sir Martin quoted as follows from the judgment of Laws LJ in the latter of those two cases:

I emphasise that the hurdle to be surmounted by the appellant under s30(1)(g), in the light of the authorities on the subject, is by no means a high one. He does not have to demonstrate a balance of probability that permission will be granted. He has to show that there is a real, not merely a fanciful, chance.

Mance LJ, agreeing with Sir Martin’s judgment in the present case, added:

Reasonable prospect is a low threshold, not to be equated with probability.

Conclusion

This decision is yet one more reminder of the dual nature of the test underlying the paragraph (f) ground of opposition and of what ‘reasonable prospect’ means in that context. It goes on to illustrate an instance when it is proper for the Court of Appeal to take into account events that have happened since the date of the hearing. In terms of practice, it also confirms that a landlord may have under consideration a range of redevelopment schemes, provided that by the date of the hearing it has made its choice.  © Property Law Journal