Any landlord of commercial property in England and Wales wishing to oppose the grant of a new lease under the Landlord and Tenant Act 1954 ("LTA") to carry out redevelopment will need to consider carefully whether the proposed works will satisfy ground (f) (an intention to redevelop). The recent county court case of Sainsburys Supermarkets Ltd v Medley Assets Limited looked at some of the issues that arise in these circumstances.
Will a tenant vacating part of the property defeat a landlord's opposition based on ground (f)?
A tenant is entitled to a new lease of the "holding" – the part of the premises that it is being occupied at the time when a new tenancy is ordered.
To rely on redevelopment to oppose a new lease, the landlord must have an intention to do substantial works to the "holding".
The problem is that the issue of whether the landlord can oppose a new lease will often be tried as a preliminary issue in Court proceedings. That will be several months (even years) before the extent of the "holding" is determined at any trial. So, what is the "holding" for the purposes of the preliminary issue?
In this case, the tenant vacated the part of its premises to which the landlord was proposing to carry out works. The result was the landlord was not doing any work to the "holding" - if it were to be determined as at the date of the trial of the preliminary issue. The landlord has sought to bolster its position by requiring the tenant to take a new lease of the whole property (i.e. not just the holding) if its opposition failed.
The Court found that despite the fact that any new lease would be for the whole premises, the tenant was able to temporarily vacate the part of the premises being redeveloped. The effect was that works to that part were irrelevant to the landlord's opposition. The tenant, therefore, managed to defeat the landlord's opposition by vacating a small part of its premises.
Will a landlord excavating beneath the floor of the tenant's demise satisfy ground (f)?
The tenant's demise extended vertically down to the existing floor level but not beneath it. The landlord had planned to excavate beneath the existing floor level and making new underpinning. The Court held that those works were below, and therefore outside of, the holding. They were therefore not relevant to the landlord's opposition to a new lease.
Will a tenant always be prevented from remaining in the property if the floor is being excavated?
The LTA provides that if it is possible for the tenant to remain in the property while the works are being carried out, then the landlord will not succeed on its opposition, even if substantial works are being carried out.
It had previously been thought that where the floor was being lowered it would not be possible for the tenant to rely on section 31A of the LTA to remain in occupation. The Court, however, ruled that this was not a hard and fast rule. If the tenant could show that it could remain in the property without being affected by the floor lowering works, then it can rely on s.31A of the LTA. In this case, the floor being lowered was in a basement area that the tenant did not need to continue its business.
Key Takeaways
So, the key takeaways are:
- A tenant can vacate part of its premises to defeat a landlord's opposition to a new lease;
- Excavating the floor below the demise will not necessarily amount to works to the holding; and
- A tenant who can continue trading whilst the floor is being lowered may be able to rely on s.31A.
If you are a landlord or tenant of commercial property in England and Wales and would like further advice on the issue of a landlord's ability to oppose granting a new lease under the LTA or you have any questions about how these issues may impact you or your business, then please do not hesitate to get in touch with our Real Estate Disputes Team or your usual Brodies' contact.
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