The County Court has done an (arguable) about turn on the known test for inclusion of a redevelopment break clause, in 1954 Act commercial lease renewals. In the recent case of BMW (UK) Limited v K Group Holdings Limited it was decided that the landlord first must have a "genuine and workable decision" regarding the redevelopment of the property. A different approach to that which went before.
The Test
In the context of a commercial lease renewal pursuant to the Landlord and Tenant Act 1954 in England & Wales, it is a well-established test for the inclusion of a redevelopment break clause as a term of any new lease, that there need only be a "a real possibility (as opposed to a probability) that the premises in question will be required for reconstruction during the continuance of the proposed new tenancy".
This test had been put to the test earlier this year in B&M Retail Limited v HSBC Bank Pension Trust where the court held that the policy of statute was not to allow the rights of a tenant to stand in the way of development; and affirmed the view that there need only to be a real possibility (not a probability) that, in this particular context, planning permission, would be obtained.
About turn?
In BMW v K Group, however, the Court did not accept the landlord's evidence, that there was a "concept" where the landlord may begin to run their own car-related business from the showroom, as being sufficient to meet the necessary intention requirements of the 1954 Act. The statute was not to be used so as to create a series of artificial hoops the landlord can use to jump through.
The Court said the landlord's intention must be more than mere thought, which had matured into a "genuine and workable decision". On the facts in the case, the Court held it had not.
Take Away
Landlords seeking to include redevelopment break clauses in lease renewals, should ensure that their plans are clearly evidenced and thorough. Whilst they need not be complete and final, the landlord must be able to show objective evidence which clearly shows that significant thought and preparation has been put into the plans and that those plans would be workable.
If you are a commercial landlord or tenant dealing with 1954 Act lease renewals or terminations, or you require advice about redevelopment break provisions and how they 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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