A landlord may oppose a tenant’s statutory entitlement to renewal of a lease of business premises, where it intends to provide the tenant with suitable alternative accommodation (Ground (d) of section 30(1) Landlord and Tenant Act 1954). If a landlord succeeds in opposing renewal on ground (d), no statutory compensation is payable. It can therefore be a useful tool for commercial landlords with assets in England & Wales.
We set out some considerations for landlords when considering this ground of opposition.
1. Are the alternative premises genuinely “suitable”?
The court will assess whether the replacement premises are suitable for the tenant’s business, considering: location, size and layout, condition and specification, impact on trading and goodwill. The alternative premises need not be identical but must allow the tenant to operate without material disadvantage.
2. Consider the tenant’s perspective
Suitability is an objective test, but the tenant’s actual use is key. Do not overlook reliance on footfall or location and operational or fit-out requirements. Landlords should seek to build a clear understanding of the tenant’s business before proposing alternatives. As noted above, any alternative accommodation should preserve any goodwill the tenant has gained from operating out of its current locality.
3. Secure the alternative premises early
Landlords must show a firm and deliverable proposal, not a speculative option. This means: control of the alternative premises, evidence they will be available at the relevant time and clarity on the proposed lease terms.
Often, the landlord will already own the alternative property it is offering, but that may not always be the case. If the offer of alternative accommodation is conditional on the landlord acquiring an interest in it, then the tenant may want visibility of the purchase contract or lease to be entered into by the landlord. Entry into an Agreement for Lease between the landlord and tenant may be vital to ensure clarity and security as to the timing of the lease of alternative premises. An agreed form of lease (preferably mirroring commercially agreed Heads of Terms) can be appended to the Agreement for Lease, documenting the terms of the lease that will be granted once the premises are available.
4. Demonstrate practical and financial viability
The landlord should show the tenant can realistically relocate on reasonable terms. Consider: timing and feasibility of any works, reasonableness of relocation costs, whether disruption to the tenant can be managed, the appropriateness of commercial terms offered.
If you are a commercial landlord or asset manager dealing with statutory lease renewals of business tenancies, or you have any queries about how these issues may impact you or your business, do not hesitate to contact a member of the Real Estate Disputes team or your usual Brodies contact.
