27th August 2014
Opposing lease renewals - tenant’s substantial beaches of the lease
There has been another interesting Court of Appeal decision on the circumstances when a business tenant ought not to be granted a new tenancy under the Landlord and Tenant Act 1954.
There has been another interesting Court of Appeal decision on the circumstances when a business tenant ought not to be granted a new tenancy under the Landlord and Tenant Act 1954. Generally a business tenant will be entitled to a new tenancy under the Act unless he has “contracted out” of this right. The landlord can only oppose the grant of a new tenancy on certain prescribed grounds such as redevelopment. However the Act also provides certain grounds for opposing the grant of a new tenancy based on tenant default such as: ground (a) the state of repair of the building if this state results from the tenant’s failure to comply with maintenance and repairing obligations; ground (b) persistent delay in paying rent; and ground (c) other substantial breaches of the tenant’s obligations or for any other reason connected with the tenant’s use and management of the holding. In each case the Court has to be satisfied that the tenant ought not to be granted a new tenancy. In Youssefi v Mussellwhite the tenant had a lamentable history of not allowing the landlord access to the premises and was in breach of terms of the lease requiring her to use the premises for the purposes of any retail trade within Use Classes A1 and A3. Indeed it appears only vestigial use of the premises was made for any business purpose. The Court of Appeal upheld the decision of the judge at first instance that the circumstances were such that the tenant ought not to be granted a new tenancy on the basis of the two substantial breaches identified. In doing so the Court of Appeal confirmed the wide nature of the Court’s discretion when considering ground (c). A landlord is not required to prove that that the relevant breach adversely affects the rental income or the value of the reversion, or to show that the landlord’s interests are prejudiced or that it would be unfair for a new tenancy to be granted. The judge was entitled to conclude that that the tenant’s failure to operate a business in accordance with the terms of her tenancy was prejudicial to the legitimate interests of the landlord. It was also clear that to expect the landlord to continue with the tenant in light of her persistent and wilful failure to comply with the terms of her tenancy would be unfair and therefore prejudicial; as the judge at first instance found, “her obstructive behaviour with regard to access undermined the efficient working of the relationship between landlord and tenant.” Whilst this was a somewhat unusual case involving an exceptionally difficult relationship between landlord and tenant it does give some helpful guidance for landlords dealing with problem business tenants seeking new tenancies. However it is essential that the ground for opposing a new tenancy is stated at the outset and to seek advice in good time when considering opposing the grant of a new tenancy whether on the basis of tenant fault or otherwise. For further information please contact Kate Church on 01223 461155 or click here to email Kate. For more information on our Dispute Resolution services please click here.