MVL Properties (2017) Ltd v The Leadmill Ltd [2025] EWHC 349 (Ch)

On 19 February 2025 the High Court handed down its judgment in MVL Properties (2017) Ltd v The Leadmill Ltd in which the Court granted an order for possession which MVL Properties (2017) Ltd (MVL) sought, opposing the grant of a new tenancy under s.30(1)(g) (Ground (g)) of the Landlord and Tenant Act 1954 (the LTA1954). The Leadmill Ltd (Leadmill) attempted to remain in occupation by asserting that the landlord did not fulfil the criteria for a successful opposition under Ground (g), and that in any event allowing the landlord to occupy and carry out its business at the property in this case would not be compatible with Article 1 Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR). 

Background

The property which is the subject of this dispute is The Leadmill, a nightclub in Sheffield (the Premises). Both MVL and Leadmill run nightclubs in the UK. 

The law

Upon expiry of a lease, the LTA 1954 provides business tenants with a qualified right to the grant of a new lease on substantially the same terms at the then market rent. There are a few narrow grounds on which the landlord can oppose the grant of a new tenancy. One of these grounds, Ground (g), provides that a landlord can oppose the grant of a new tenancy where “on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein”. In order to rely on this ground of opposition, a landlord must be able to show (i) subjectively that it has the firm and settled intention to occupy the property for the purpose of carrying out its business, and (ii) objectively that it has a reasonable prospect of being able to fulfil that intention. 

The facts 

In evidence MVL offered to provide an undertaking to the Court that it shall as soon as reasonably practicable after obtaining possession (i) undertake works to fit out the Premises to operate its business, (ii) occupy the Premises for the purposes of establishing its business and (iii) after completion of the fit out works, occupy and carry out its business at the Premises. The Court held, following Espresso Coffee Machine Co Ltd v Guardian Assurance Co [1959] 1 WLR 250, that this undertaking alone was sufficient to satisfy the subjective limb of the Ground (g) test. 

More argument was heard on whether MVL satisfied the objective limb of the Ground (g) test. Leadmill’s evidence was that, should a new tenancy be successfully opposed and it be required to vacate, it would remove many of its fixtures and fittings installed at the Premises. MVL’s evidence was that it would therefore require fit out works to be undertaken before it would be able to open its business, which it estimated would cost in the region of £2m and could be completed within 35 weeks of obtaining possession. Leadmill (its evidence being that the same works would cost more than £4m and take up to 20 months to complete) argued that, as MVL needed to undertake works, it was not objectively able to fulfil its intention to carry out its business from the Premises within a reasonable time after termination (it was common ground between the parties that the words “on the termination” in Ground (g) were to be read to include “or within a reasonable time thereafter”). The Court, which accepted MVL’s costs and time estimates for the works, disagreed with this argument and held that undertaking fit out works is occupying for the purposes of carrying out a business,and that in any event 35 weeks for fit out works would not be unreasonable. It further held that as the extent of the fit out works required was directly related to the fixtures and fittings Leadmill sought to remove on termination, it would not be open to it to argue that the time required for the fit out works would be unreasonable.

The ECHR

In the alternative to its arguments that MVL did not satisfy the objective limb of the Ground (g) test, Leadmill argued that under the Human Rights Act 1998, the LTA 1954 must be read in a way which is compatible with the ECHR, and that in this case that would prevent MVL from invoking Ground (g) and carrying on its business at the Premises. 

Leadmill’s argument was based on Paragraph 1 of A1P1 of the ECHR which provides that “A natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to conditions provided for by law and by the general principles of international law.” Leadmill argued that where a tenant owns goodwill attached to the landlord’s property the landlord cannot invoke Ground (g) to carry on “essentially the same business” as the tenant, as this would have the effect of expropriating the tenant’s goodwill. In other words, if the tenant runs a nightclub from the landlord’s property, the landlord should not be able to oppose the grant of a new tenancy in order to open its own nightclub at the same premises, as in doing so it would be trading on the goodwill attached to that property built up by the tenant. 

The Court rejected this argument for a number of reasons. Firstly, whilst it agreed that goodwill was a possession for the purposes of Paragraph 1 A1P1, it did not accept that Leadmill owned any goodwill attached to the landlord’s property. Leadmill’s goodwill instead attached to its registered trademarks and its get up, which it would retain following termination of the tenancy. This, combined with the fact that Leadmill intended to remove its fixtures and fittings on termination, meant there could be no goodwill attached to the “derelict shell” of the property that would remain. The Court also accepted that as the LTA 1954 only grants the tenant a contingent right to a new lease, it could not be said that terminating the tenancy would deprive the tenant of its goodwill, as it only ever had a qualified right to it (there being a number of mechanisms in the LTA 1954 by which a new tenancy can be avoided). Furthermore, the Court went on to state that even if Leadmill were to be deprived of its goodwill in this case, such deprivation would be compatible with Paragraph 1 A1P1 as Ground (g) serves the public interest by protecting the property ownership rights of the landlord. The Court held that in such a case Ground (g) strikes a fair balance between the competing property ownership rights of the landlord and tenant. 

Commentary

This case serves as a good reminder of the current state of the case law surrounding Ground (g) and confirms that:

• A landlord may prove its subjective intention to occupy by providing an undertaking to the court.
• The carrying out of fitout works is occupation for the purposes of carrying out a business. 
• Whilst goodwill can be a possession for the purposes of A1P1 ECHR, the tenant must prove that they own goodwill which is attached to the property in question. However, as the LTA 1954 only provides for a contingent right to a new tenancy, a tenant is not deprived of its goodwill when it is not granted a new tenancy. 
• Even if a tenant were to be deprived of its possession in the event a new tenancy was not granted, this would serve the public interest by protecting the property ownership rights of the landlord, and therefore not be incompatible with A1P1 ECHR.