Landmark landlord and tenant ruling is a case of common sense

It's not often that a dispute between landlord and tenant gets widespread publicity. MD Tim Garratt ponders on the Supreme Court's long-awaited judgement on S Franses V Cavendish

Landlord and Tenant Law in commercial property has changed very little since the ubiquitous Landlord and Tenant Act 1954. Most property practitioners come into contact with this piece of legislation regularly.

Part of the legislation deals with the ending of a formal tenancy. There are rules and procedures which are well trodden. It is quite rare for cases to attract wide attention as most things have been litigated over a 64 years. But this week there has been a ‘landmark case’. It concerns a prime piece of real estate on Jermyn Street in London and the landlord is the Cavendish Hotel. The tenant is an art gallery. 

The case turns on an application by a tenant for a new tenancy, the landlord, as he is entitled to do, turned down the request. To do so he needed to rely on a specified ground in the legislation and hung his hat on one which suggests you can’t have a new tenancy if the landlord intends to demolish or substantially alter the premises you are in. That makes sense – and if you have your tenancy defeated you are entitled to compensation.

Proposed works had no practical use

All well and good so far, but there was an issue. The motive for refusing the tenancy was to get possession – to the extent that 'it was common ground that the proposed works had no practical utility other than eviction.' The Supreme Court said that the landlord's intention did not have to be a reasonable scheme, nor could you question the motives behind the scheme. But the commentary said that, 'On the facts, the tenant’s possession of the premises did not obstruct the landlord’s intended works and the landlord did not intend to carry them out if the tenant persuaded the court that the works could reasonably be carried out while he remained in possession.'

Firm and settled intention

So the tenant won the appeal. And perhaps not surprisingly? The summary, put succinctly by Lord Sumption in his judgement, was that the use of this ground for possession requires a ‘firm and settled intention to carry out the scheme of work’. Furthermore the downfall here was that scheme eventually produced before the Court could have been done with the tenant in-situ and so it rather fell apart to argue you were going to demolish or substantially alter the premises.

A common sense decision I think. But then you should remember that the decision of lower courts were overturned here!

Innes England offer advice to Landlords and Tenants on matters relating to lease disputes – including for dilapidations claims and for handling lease renewals.