Property Litigation Newsletter – March 2010
A Landlord's genuine intention to occupy?
Landlords may refuse the renewal of a lease on the grounds of their own intention to occupy the premises - but the Court is intervening where the facts of the case suggest sharp practice, as revealed by the decision of the recent Patel v Keles case.
One of the provisions in the Landlord and Tenant Act gives landlords the right to refuse renewal of a lease if they intend to occupy the premises themselves, either as their residence or to establish a business. This is set out in Section 30(1)(g) of the Landlord and Tenant Act 1954 - for ease of reference this is simply referred to in this article as "ground (g)".
This provision cannot be used by a landlord if its interest was purchased within the last five years of the lease.
In the case Patel v Keles, the tenant applied for a new lease and the landlord opposed the renewal on ground (g) and, in doing so, claimed that he intended to establish a newsagents business at the property. In support of its claim, the landlord offered an undertaking to the Court that he would not use the premises for 2 years for any purpose other than as a newsagents business carried on by him.
The Ground (g) grey area?
The issue here was that ground (g), when being used to object to a new lease being granted, does not specify for how long the landlord must intend to occupy the property for the purposes of his business. Given this 'grey area' the tenant in this case appeared to have no protection against the risk that the landlord would take possession for the purposes of his own business but then sell the property once the tenant had been forced to leave.
When the issue came before the Court of Appeal it ruled that, if at the date of the hearing the landlord had an intention to sell the property within 5 years, then it would not have the necessary intention to occupy for the purposes of ground (g).
Although the Court could not find that the landlord had a settled intention to sell, generally it took the view that it was likely that a sale would occur. There were various reasons why the Court reached that view.
What were the doubts regarding the landlord's intention?
The undertaking given by the landlord was limited to 2 years and did not impose any obligation on the landlord to actually trade from the premises - i.e. it was expressed in the negative so that the Landlord was not to use the premises for anything other than a newsagents business. The landlord did not need to carry on a business from the premises as he had other sources of income and, importantly, another business run by the Landlord on adjoining property had already been closed.
Given these points the Court doubted whether the position put forward by the landlord in relation to its ground (g) intention to occupy was genuine. As a result, the landlord's objection to the lease renewal under ground (g) failed, entitling the tenant to a new lease.
What does this case demonstrate? It shows the Court's continuing efforts to ensure that the Act is not open to potential abuse and that it can and will intervene to assist the tenant where the facts of the case suggest sharp practice on the part of the Landlord.
Rob Nicholson is a partner within the Michelmores property litigation team. For further information on the issues raised in this article, please contact Rob at robert.nicholson@michelmores.com.
This information has been prepared by Michelmores LLP as a general guide only and does not constitute legal advice on any specific matter and should not be relied upon as such. We recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of this information.
