Where a tenant of commercial property in England and Wales benefits from statutory security of tenure, there is an automatic, as-of-right, entitlement to a new tenancy once the contractual term has ended. If a landlord wishes to oppose a tenant's request for a new tenancy, there are a number of statutory grounds it can rely upon and time is of the essence before the right to oppose is lost entirely.
Statutory grounds of opposition
There are seven grounds of opposition, namely:
- The tenant has obligations in relation to repair and maintenance under the current lease and the property is in disrepair;
- There has been a persistent delay in paying rent;
- The tenant has been/is in substantial breach of any other obligation under the current lease;
- The landlord can offer suitable alternative premises;
- The tenancy was created by sub-letting;
- The landlord intends to demolish or reconstruct the premises or a substantial part of the premises and they cannot do so without recovering possession;
- The landlord intends to occupy the premises for the purposes of carrying out their own business or as their residence.
Recently, in the case of Gill v Lees News Ltd [2023], three of these grounds were considered by the Court of Appeal, providing useful guidance to commercial landlords, tenants and practitioners alike on what factors should be taken into account when opposing a tenant's request.
Tenant's request and Landlord's opposition
The tenant had served requests for new tenancies of two separate properties upon its landlord. The landlord opposed renewal within the limited 2-month window and served a counternotice opposing renewal based upon grounds (a), (b) and (c).
Time for performance
The court was concerned with two particular issues: 1) what date/s must the grounds be established and 2) what was the scope of the phrase made in reference to the grounds giving rise to a determination that "the tenant ought not to be granted a new tenancy".
Despite there being two appeals, it was accepted that as at the date of the landlord's counternotice the property was considered to be in substantial disrepair and the tenant had been persistently late paying rent. But, by the date of the court hearing, despite some challenging factual evidence by the tenants, the disrepair had been remedied, delayed rent was minor and not recurring and other breaches were trivial.
What the court will take into account
The court did grant the tenant a new tenancy and also identified a number of factors that it will take into consideration when opposed commercial lease renewals come before it.
On the issue of ground (a), notably, the court warned "If the tenant has a lamentable record of performance and only puts things right at the last minute that is, in my judgment, something that the court can legitimately take into account". Further considerations:
- the grounds being relied upon by a landlord should be considered both on their own and all together.
- Actions by a tenant taken between the time a landlord serves notice (whether that be a section 25 notice or a counternotice) and a hearing i.e. whether the tenant undertakes repair works. However, the court is not confined to just considering disrepair at the date of the hearing - breaches at the date of the landlord's notice and earlier in the lease term can be relevant.
- the impact upon both the landlord and the tenant in granting/not granting a new tenancy.
- the tenant's conduct during proceedings.
Take-away
A sage reminder to tenants to undertake remedial works as and when they arise: a last-minute dash to rectify breaches of repairing covenants will not necessarily save a lease renewal. Landlords can take comfort knowing that persistent breaches by a tenant during the lease term will be taken into account.
If you are a commercial landlord or tenant dealing with statutory lease renewals or terminations or you have any questions about how these issues may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies' contact.
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