Posted: Tuesday, 6 January 2015 @ 11:45
As we start 2015, it does look as though the prospects for commercial landlords in opposing lease renewals under Part II of the Landlord and Tenant Act 1954 has become a lot easier as a result of the Court of Appeal decision in Youssefi v Musselwhite.
To recap on the law, a landlord who does not want to grant a new tenancy must establish one or more of the seven statutory grounds in section 30(1)(a)-(g) of the Act.
Grounds (a) -(c) are discretionary. Even if the landlord makes them out the court can still grant a new tenancy. A number of factors are taken into account including all the circumstances surrounding the breach, the conduct of the parties, possible future problems if the lease is granted, and what protection can be given to the landlord.
The case involved only 3 of the grounds, the discretionary grounds. A claim that the tenant had failed to comply with a lease covenant, in this case a repairing obligation (ground (a)), a claim that the tenant had persistently delayed in paying rent (ground (b)), and a claim that the tenant had breached both its covenant to allow the landlord access to the premises to view their state and condition, and had breached the user covenant in the lease (ground (c)).
What was interesting was that the Court of Appeal, while disagreeing with the trial judge's finding in support of the landlord on ground (a), (ground (b) was not made out), stated that ground (c) was to be approached on a much broader basis. The court should focus on "substantial breaches" and "any other reason connected with the tenant's use or management of the holding".
The Court of Appeal refused to grant a new tenancy. It had to determine if the proper interests of the landlord would be prejudiced by having to continue with a landlord/tenant relationship. Would it be unfair to the landlord, having regard to the past performances and behaviour in relation to its obligations to repair and maintain the holding, if the tenant were to be foisted on the landlord for a new term. The Court of Appeal decided that it would be unfair on the landlord.
This is a salutary lesson for tenant who may have much to lose if they cannot rely on renewal of their commercial lease. It will be in their interests to comply with all lease terms and keep on the right side of their landlord. For landlords their may be greater opportunity to successfully oppose an application for a new lease.
Nigel Musgrove
Business and Litigation Solicitor
Tel: 0845 003 5639
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