A surprising, but sensible, lease renewal decision

28th July 2016

A recent County Court case highlights a surprising, but sensible, option available to landlords involved in lease renewal proceedings. Real Estate Litigation specialist Martin McKeague explains Waterstones Booksellers Ltd v Notting Hill Gate KCS Ltd (2016, unreported).

Issues of security and scheduling

The Landlord and Tenant Act 1954 (the 1954 Act) gives security of tenure protection to tenants in occupation of premises for the purposes of a business. That effectively means that landlords can only recover possession of such premises if they can establish, through court proceedings if necessary, one or more of the statutory grounds for possession which are set out in section 30 of the Act.  Section 30 (1) (f) provides that a landlord may oppose the grant of a renewal lease, or make an application for termination of a protected tenancy without the grant of a new lease, if it can prove, at the date of trial, that it intends to redevelop the premises.

Landlords wishing to recover possession of protected business premises are able to serve notice of their intentions six to twelve months prior to the contractual expiry of the lease. If tenants challenge the landlord’s intention or ability to carry out the proposed redevelopment, the matter can be resolved at court which may take a substantial period of time, in some cases, to be heard.  Often, therefore, landlords are faced with the reality of having to notify tenants of their intentions a long time before actually being able to commence redevelopment.  Landlords are therefore often in the difficult position of having to commit to a proposed course of action at a very early stage and/or in circumstances where they have little or no control over the possession and redevelopment timetable.  Such was the background to the recent Waterstones Booksellers v Notting Hill Gate case.

Legal procedure accommodating real life

When the contractual expiry of the lease drew near and the tenant applied for a renewal lease, the landlord opposed the tenant’s claim on redevelopment grounds. However, as the proposed redevelopment scheme became subject to delays, the landlord withdrew its opposition to the grant of a new lease out of concern that it would not be able to satisfy the ‘ground (f) test’ [1] by the trial date.

Then, some twelve months later, when the court proceedings had not progressed substantively but the landlord’s proposed scheme had got back on track, the landlord applied to the court to restore its opposition to the grant of a renewal lease.

Finding that the relevant law and procedure was flexible enough to accommodate the fast-changing nature of modern commercial development, the County Court allowed the landlord’s application to succeed.

Surprising, but sensible, decision

This decision might appear surprising because case law has established that valid 1954 Act termination notices [2] cannot be unilaterally amended or withdrawn and that a landlord who has elected not to oppose the grant of a renewal lease cannot later change its mind [3].  One may have assumed that, equally, a landlord who has abandoned its opposition, and has therefore indicated to its tenant that a renewal lease can be granted, should not be allowed to resile from that.

However, the Civil Procedure Rules (CPR), which govern civil court proceedings including 1954 Act lease renewal cases, do allow both amendments to statements of case and withdrawal of admissions, in certain circumstances [4].

Applying the relevant legal and procedural principles to find for the landlord, the court held:-

• the landlord had acted in good faith when it originally withdrew its ground (f) opposition;
• the landlord’s position had genuinely changed in the intervening 12 months;
• the court proceedings had not progressed substantively in the same period and, significantly, no trial date had yet been fixed;
• the tenant would not suffer prejudice if the landlord’s opposition to a renewal lease was restored, as it would simply be returned to the position it was in at the outset of the court proceedings. The tenant still had the 1954 Act protection that the landlord would have to prove its redevelopment ground of opposition at trial before it was able to recover possession; whereas
• the landlord would suffer prejudice if it was not allowed to amend its statement of case and effectively withdraw its admission that a renewal lease could be granted, because that would frustrate the landlord’s redevelopment plans;
• it was relevant to consideration of the balance of prejudice that the landlord had made an open offer to the tenant that it would not recover possession before January 2017. (That allowed the tenant the benefit of a significant further period of certain possession, including an additional Christmas trade period).

WM Comment

This case is a legally and commercially sensible decision. It takes into account the reality of the redevelopment scheme and timetable; the conduct of the parties; and the respective interests of both the secure business tenant and the landlord.

Whether or not to allow amendments and withdrawals of admissions is at the discretion of the court and that means that every case will turn on its own facts. However, Waterstones Booksellers v Notting Hill Gate is a victory for common sense, as well as a useful decision for landlords to rely on if and when practical or scheduling issues arise which affect overall plans for the management or occupation  of their premises.

If you would like any further advice or assistance in relation to this case or any other business lease or possession issue, please do not hesitate to contact Martin McKeague or any member of Walker Morris’ Real Estate Litigation team.

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[1] i.e. The landlord must have a firm and settled intention to do that which he says he intends to do. His planned project must have moved “out of the zone of contemplation… into the valley of decision” (Cunliffe v Goodman [1950] 1 All ER 720; Fisher v Taylors Furnishing Stores [1956] 2 QB 78); and the landlord must have a reasonable prospect of bringing about the desired result (which will turn on, for example, planning permissions and permitted use, financial and factual feasibility, and the like).
[2] served pursuant to section 25 of the 1954 Act.
[3] Hutchinson v Lambeth [1984] 1 EGLR 75 CA; Felber Jucker & Co Ltd v Sabreleague Ltd [2005] PLSCS 162
[4] See CPR Parts 17 and 14 respectively. See also Sollitt v D J Broady Ltd [2000] CPLR 259; Braybrook v Basildon & Thurrock [2004] EWHC 3352; CPR PD 14.7; Cobbold v Greenwich LBC, August 9, 1999, unrep. CA; 17.3.5 White Book, Vol. 1