Opposing Lease Renewal on the Grounds of Redevelopment

The Landlord and Tenant Act 1954 (the Act) was introduced after the end of World War 2 to provide business tenants with security of tenure.

The Act provides business tenants with the right to continue in occupation of the premises after the end of the contractual term on the same terms as their current lease, as well as a right to acquire a new lease.

A tenancy that is protected by the Act continues unless terminated by one of the methods prescribed under the Act.

Where the Act applies, it is more difficult for a landlord to recover possession of the property as they have to rely on one of the statutory grounds. 

This can have significant implications if a landlord wishes to redevelop.

To terminate a protected tenancy, a landlord must serve a notice under section 25 of the Act setting out the date for the proposed termination date (which must not be less than six months and no more than 12 months from the date of the notice) and the statutory grounds they are relying upon to oppose the grant of a new lease.

There are many different statutory grounds under section 30(1) of the Act, including that the landlord has an intention to redevelop.

Any statutory ground stipulated in the notice must be put forward in good faith.

A landlord should not oppose a tenant's lease for tactical reasons.

This would simply put the landlord at risk of costs in any subsequent litigation.

There are mandatory and discretionary grounds of opposition. 

Discretionary grounds are at the court's discretion as to whether or not a new lease should be granted.

Where a mandatory ground is being relied upon, the court must refuse to grant a new lease if that ground is satisfied.

A landlord can evidence intention by collating:

• Plans, drawings, specifications, planning applications, permissions, relevant consents.
• Proof of decision-making.
• Obtaining tenders for works.
• Obtaining building contracts.
• Obtaining vacant possession of other parts of the proposed development.

The landlord, in addition, must show that it has a reasonable prospect or a "real chance" of carrying out the works and that the proposals are something that a reasonable landlord would take.

The evidence of ability can be shown with permissions, consents, proof of finance and contracts, for example.

The proposed works must be started within a reasonable time at the end of the tenancy.

It does not need to be carried out within a prescribed time period.

However, the courts have held three to six months after a court order terminating the tenancy agreement is reasonable.

Landlords should seek professional advice early, particularly if a tenant serves a section 26 notice requesting a new tenancy agreement.

This ensures that the landlord does not miss the opportunity to serve a counter-notice within the two-month deadline.

If the landlord fails to serve the counter-notice, then the landlord will be unable to oppose the grant of the new lease.

Landlords should obtain advice if there are plans to sell the property to a developer, which is conditional on vacant possession.

The landlord should obtain all evidence early on.

A tenant could push the landlord to court quickly if it believes the landlord cannot prove the ground and the necessary intention to redevelop.

The landlord should consider relying on other grounds of opposition if they assist, particularly those where statutory compensation would not be payable.

Suppose a tenant accepts that a landlord can satisfy ground (f) at trial.

In that case, the parties may be able to negotiate an early surrender of the lease, subject to the landlord paying the tenant the compensation it is entitled to.