Reform of the 1954 Act - the Best of Intentions

There are many that hope that the upcoming general election will not derail plans to reform the Landlord and Tenant Act 1954. The main argument for change is that the policy justifications for security of tenure have fallen away as the real estate market and consumer behaviours have evolved. What now remains is legislation that intrudes on the operation of the free market and which continues to generate bureaucracy and litigation. Some of the best known recent decisions focus on how the Act addresses difficult questions as to intention and motivation in the context of requesting renewal, opposing renewal and claiming statutory compensation under the Act.

• A conditional intention to demolish or carry out significant works  – S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62

The test for a landlord seeking to oppose the renewal of a business tenancy on the basis of ground (f) is whether or not it can show at the hearing date that it has a firm, settled intention to either demolish or carry out substantial works to the premises and that it is practically able to do so. The question that fell to be decided by the Supreme Court in this case was whether the qualifying intention to carry out the works could be lost where the Landlord’s motive in respect of some elements of the work was simply to defeat the tenant’s statutory rights to renew.

In this case the Supreme Court held that the ‘acid test’ was whether the landlord would intend to do the works if the tenant left voluntarily. If the landlord would not carry out the works in that situation, then the necessary intention has not been established.

This decision has hardened the required standard of intention and has helped to reduce the incentive for landlords to design schemes that include elements of “conditional” work that are purely engineered to support a ground (f) claim.

• Landlord intention to take occupation – McDonald's Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch)

In this case the tenant served a notice on the landlord under section 26 of the Landlord and Tenant Act 1954 requesting a new tenancy of the premises. The Landlord opposed the grant of a new tenancy relying on ground (g) on the basis that it intended to occupy the premises for the purpose of running its own business – a restaurant called Zen Bento – and as evidence for that intention it gave the Court an undertaking to commence trading as Zen Bento as soon as reasonably practicable after obtaining vacant possession. In reliance on that evidence the Court issued an order terminating the tenant’s lease.

The Landlord did not did not open Zen Bento by the date specified in its undertaking but it did later open a different restaurant and bakery at the premises. The Tenant sued for compensation for misrepresentation under s.37A of the Landlord and Tenant Act 1954.

The High Court found that an unqualified representation had been made to the Court as to the intention to occupy and trade as Zen Bento and the evidence suggested that at the time the representation was made no decision had been taken as to what business would operate from the premises. It was held that the termination order had been obtained by misrepresentation with the result that the Tenant was entitled to compensation.

This decision again demonstrates the Court’s hostility to Landlords that are not transparent as to their intentions when engaging with grounds for opposing the grant of a renewal lease.

• Tenant requests for renewal – Sun Life Assurance v Thales Tracs Ltd (formerly Racal Tracs) [2001] 34 EG CA

The Franses and Shirayama decisions would seem to suggest that the Courts are applying the 1954 Act in a way that discourages strategic use of the 1954 Act renewal process. However, that conclusion is difficult to reconcile with the position established in the well-known Sun Life decision that the service of a Tenant’s request for a new tenancy under section 26 of the Landlord and Tenant Act 1954 remains valid even if on the date that the notice is served the Tenant cannot have had an intention to take the new lease because it has exchanged an agreement for lease to take premises elsewhere.  

I find it difficult to reconcile the position that “gamesmanship” in the renewal process should be so clearly discouraged in the context of Landlords relying upon statutory grounds for opposing renewal and yet permitted where undertaken by a Tenant in connection with section 26 requests.  

The inconsistency may simply be a matter of statutory interpretation - unlike sections 30 and 37 of the 1954 Act, section 26 does not include a reference to intention. Looking ahead it will be interesting to see if reform of the Act will try to deliver balance here and expressly require that Tenants should be prohibited from service of a section 26 request unless they hold a genuine desire to take a new lease.