Pride before a fall

Pride before a fall: what landlords need to know before serving a Ground (f) Notice

The Landlord and Tenant Act 1954 (“the 1954 Act”) provides statutory protection for business tenants.  Such tenants enjoy what is known as ‘security of tenure’ which means that their tenancies will continue beyond the end of the fixed contractual term and that they are entitled to request (and the landlord must grant) a new tenancy on similar terms. 

The landlord can only refuse the tenant’s request for a new tenancy if it can satisfy one or more of the statutory grounds set out in the 1954 Act.

One of those grounds is where the landlord intends to demolish or reconstruct the premises and requires possession of the property in order to carry out those works.

This ground is commonly known as “Ground (f)”. 

The wording of Ground (f) in the 1954 Act begins with:-

“On the termination of the current tenancy the landlord intends to demolish or reconstruct the premises…”

The wording seems straight forward.  But as ever, the devil is in the detail. 

The case of Pridewell Properties (London) Ltd v Spirit Pub Co (Managed) Ltd (“Pridewell”) centred on a landlord’s right to oppose the grant of a new lease in reliance upon Ground (f) and has provided a warning for landlords.

In this Pridewell case, Pridewell was the landlord and Spirit Pub Co was the tenant.  The tenanted premises were a public house known as The Railway Bell.  The landlord intended to build three new dwellings within the beer garden and to carry out additional works to the existing pub building. It clearly needed possession of the tenanted premises in order to carry out these works.

When the tenant applied for a new lease, the landlord refused and relied upon Ground (f) stating that it intended to “demolish or reconstruct the premises”.

The tenant challenged the landlord on this and the case came to trial. 

The specific issue that fell under the microscope was the wording of Ground (f) and, specifically, whether the landlord was actually able to carry out the works “on the termination of the current tenancy”.

Crucially, by the time of the trial, the landlord had not obtained planning permission for its proposed works.  The Trial Judge was told that it would take the landlord between 10 and 14 months after the landlord had regained possession of the premises to obtain planning permission and to be ready to start the building works. There was unlikely to be a problem obtaining the permission but there was going to be a delay.

The question for the court was whether the landlord was able to demonstrate that it could carry out the works “on the termination of the current tenancy” or whether, in actual fact, a delay of 10 to 14 months post tenancy termination meant that the landlord could not satisfy that Ground (f) requirement.

After considering the legal authorities, the trial judge came to the view that if a landlord was having to wait for 10-14 months after regaining possession before it could start work, the landlord could not satisfy the requirement in Ground (f) that it intended to carry out the works “on the termination of the current tenancy”.  Put simply, the delay was excessive.

The judge therefore found in favour of the tenant. 

The landlord appealed to the High Court.

One of the landlord’s arguments before the appeal judge was that the tenant had refused to allow the landlord access to the building during the tenancy so that it could start the planning process. It argued that this was partly why there was going to be a delay with the implementation of the works. The tenant had, in a sense, thwarted the landlord’s ability to put itself at a more advanced stage of the planning process. The landlord sought to argue that a period of between 10 to 14 months was a reasonable period of time in all the circumstances.

The appeal judge disagreed. The judge was unsympathetic towards the landlord’s argument that it was unable to gain access to the premises to carry out the intrusive investigations required to facilitate the planning process.  The judge made the point that the terms of the lease (and therefore the difficulty for the landlord obtaining access) were simply the consequence of the lease terms that had been agreed between the parties. If the landlord now regretted that commercial bargain, so  be it, but that did not help the landlord get around the requirements of Ground (f).

The landlord’s appeal was dismissed and the court found in favour of the tenant.

The key takeaway from this case is that if a landlord is going to rely upon Ground (f), it needs to plan ahead carefully, and it should do so long before it serves Notice on a tenant.

If the tenant does contest the landlord’s Notice and the case comes before a trial judge, it is essential that the landlord is able to satisfy the court that it is able to carry out works “on the termination of the current tenancy”, in other words without undue delay once possession is recovered. If there are still steps to be taken in order to enable the landlord’s intention to be carried into effect, such as obtaining planning permission, the landlord is likely to face a very rough ride.

If you have any questions in relation to issues raised in this blog, please contact Andrew Turner, Director in the Hughes Paddison Property Litigation Team, at aet@hughes-paddison.co.uk