Posted by Caroline Preist, Partner
Injunctions cannot ‘injunct’ against ground (f) redevelopment
A section 25 notice which opposes a lease renewal will need to specify a ground which it relies on. Ground (f) is one of the most commonly used, and has been the subject of much legal conjecture recently.
The test for determining whether a landlord has satisfied ground (f) is:
“that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding”.
The case of S Frances v Cavendish Hotel established that an additional factor would need to be considered as well. This factor is called the ‘acid test’: will the landlord still intend to redevelop the property even if the tenant chooses to move out of the premises? Please see this (link to my previous article on S Franses) article for more information. There was considerable fear on the part of landlords following this judgment. However, the case below should ease tensions as it shows that the Courts will be reasonable and most importantly, fair, when deciding whether or not a landlord can fulfil the ground (f) test.
London Kendal Street No 3 Limited – The Tenant
Daejan Investments Limited – The Landlord
The Tenant was renting four suites within the Landlord’s property. The Landlord served a section 25 notice on the Tenant, on the basis that it wished to redevelop the property. The redevelopment meant that suite C2 (one of the four suites) would need to be vacant, and this lease had to be terminated. However, the added complication here was that the Landlord began some of the redevelopment in the basement before the expiry date of the section 25 notice. These works caused significant noise to the suites, and this led to the Tenant’s allegations that the redevelopment was causing a breach of their quiet enjoyment, as granted by their lease. They therefore threatened to issue injunctive proceedings against the Landlord.
The question to consider in this dispute is: is the real or probable threat of the grant of an injunction enough to prevent ground (f) from being satisfied? In other words, is an injunction against the works/redevelopment enough to stop the ground (f) test from being fulfilled?
The short answer is no, as ruled by Saunders J. The Court was careful in its decision to avoid the possibility of the Landlord being put in a situation whereby it would not be able redevelop/carry out works to its property. Given that there were no further issues with the Landlord’s plan to carry out the works (for example, planning permission had been granted), the Judge was satisfied that both the objective and subjective test under ground (f) had been met. The risk of an injunction was not enough to stop the Landlord from relying on ground (f).
I am sure that this will be a welcome decision for landlords who were concerned following the decision in S Franses. This judgment shows that the courts are taking a fair approach when considering whether landlords satisfy the test under ground (f). If a landlord can show that it has undertaken all the necessary steps to begin carrying out the works, and it is also able to satisfy the subjective test, it is likely that courts will recognise this as fulfilment of the ground (f) test. I therefore have confidence that the court system will be able to achieve a fair balance between landlord and tenant rights with respect to the redevelopment ground.
If you would like any advice, please contact Jasmine Mahboobani in the Property Disputes team for more information:
020 7842 1436 Email us
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