Removal of a Secure Tenant for Redevelopment Purposes

If a landlord wishes to redevelop a property, they may face the challenge of having to remove an existing tenant who has security of tenure. In these circumstances, the landlord will have to rely on Section 30(1)(f) of the Landlord and Tenant Act 1954 under which they will have to establish a genuine and reasonable intention to undertake the redevelopment at the end of the lease. 

The Landlord and Tenant Act 1954

The Landlord and Tenant Act 1954  (the Act) provides business tenants with “security of tenure” by giving them the right to continue in occupation after the end of their lease on the same terms as the expiring lease. It also gives tenants the right to acquire a new lease and provides them with greater protection from eviction.

When does the Act apply?

The Act applies if:

• the tenant occupies the premises for the purpose of its business,
• the premises are occupied by way of a lease, whether express or implied (not a licence), and
• the lease is not “contracted out” of the Act.

There are some limited exclusions.

For more information about Security of Tenure visit: https://rswlaw.co.uk/a-guide-to-commercial-leases-part-2/

Recovering possession for redevelopment

To terminate a protected tenancy, a landlord must serve a notice under section 25 of the Act in the prescribed form. If the landlord is relying on Section 30(1)(f), they must establish that they intend to:

• demolish or reconstruct the premises comprised in the tenant’s holding or a substantial part of those premises, or
• carry out substantial construction work on the premises comprised in the tenant’s holding or part of those premises.

The landlord must also show it could not reasonably carry out the relevant work without obtaining possession of the premises.

Intention – the subjective test

The landlord must prove they have the intention to redevelop the premises at the date of the hearing. It must be a firm and settled intention to carry out the redevelopment works. To that end, they will need evidence of intent which may take the form of funding, detailed plans or planning, etc.

Realistic prospect of carrying out the development – the objective test 

A landlord must also show they have a reasonable prospect of carrying out the works and overcoming any obstacles that stand in the way. This may mean producing evidence of planning permission or demonstrating that funding has been secured.

Within a reasonable time

The proposed works should be started within a reasonable time of the end of the tenancy. Although there is no statutory time limit, three to six months after a court order terminating a lease has generally been considered appropriate.

Recent case law

In the recent case of Spirit Pub Co (Managed) London Ltd v Pridewell Properties (London) Ltd, the landlord sought possession of a pub in order to redevelop the upstairs of the property into residential flats.

In the event, the judge concluded that the landlord had demonstrated a firm intention to carry out the redevelopment and that its intention was not conditional even though the works could not be commenced until at least 14 months after the ending of the existing tenancy.

However, the judge also concluded that the landlord had not demonstrated a real prospect of being able to obtain the necessary funding.  The landlord had provided evidence of funding, but a condition of that funding was that landlord company directors would provide personal guarantees and the landlord had not produced any evidence that the directors’ personal assets would be sufficient to support such guarantees.

Commentary

Whilst 14 months may be considerably longer than what is usually considered reasonable, this delay was in part because the tenant had declined to volunteer additional rights of access to enable the landlord to take some preparatory steps and although the judge found the tenant was entitled to do that, the judge also found that the tenant then could not pray in aid the resulting delay.

Applications such as this are often difficult and this case serves as a reminder that landlords will need clear evidence of a genuine and realistic plan. Landlords who are considering a development project should take legal advice early, and before the expiration of the any existing tenancy. 

For more information about commercial leases, visit: https://rswlaw.co.uk/a-guide-to-commercial-leases-part-1-overview/

If you would like to discuss the above, please call 020 3988 0170 or contact us via our website.

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