Can A Contrived ‘Charade' Prevent A Tenant From Renewing Their Lease?

It is well established that a landlord can oppose renewal of a business lease if he demonstrates settled intention to demolish, reconstruct or carry out substantial construction works to the premises or a substantial part (and could not reasonably do so without obtaining vacant possession).

But how genuine do those intentions have to be and is the landlord's motive and the economic viability of any relevance? The Courts have consistently resisted analysing the economic viability of the landlord's intentions unless they cast doubt on whether the intentions are genuine.

In the recent decision of S Franses Limited v The Cavendish Hotel (London) Limited [2017] EWHC 1670, in the High Court on Appeal from the County Court, a tenant's claim under the Landlord and Tenant Act 1954 ("the Act") for a new tenancy at 80 Jermyn Street, London W1 ("the Premises") was dismissed on the basis that the Landlord had made out its ground of opposition under s.30(1)(f). However the case raised important questions of interpretation and considered the relevance of a landlord's intention and motive.

Background

S Franses Limited ("the Tenant"/appellant) is a textile dealership with a renowned specialism in antique tapestries and textile art. The Tenant occupied the ground floor and basement of the Premises. Part of the Premises also houses a tapestry archive. The gallery had operated for more than 25 years. The remainder of the building is occupied and managed by The Cavendish Hotel (London) Limited ("the Landlord") as a luxury hotel.

On 16 March 2015 the Tenant served a request for a new tenancy under s.26 of the Act. On 15 May 2015 the Landlord served a counter notice relying on ground s.30(1)(f) "that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises".

It was the Tenant's case that some aspects of the Landlord's intended works had been contrived only for the purposes of satisfying ground (f). Both in the first instance decision and on appeal, the judges accepted the Tenant's case in this regard. The factitious character of the intended works was evidenced by the fact that a new central wall dividing what would become two retail units stopped two metres short of the shopfront at ground floor level. In cross examination, the witness for the Landlord accepted that the works would not be undertaken if the Tenant left voluntarily and that if the court ruled against the Landlord on ground (f) the works would not be...