S Franses Ltd v The Cavendish Hotel Ltd

The Supreme Court has ruled that a hotelier landlord could not oppose a Section 26 Notice requesting a new tenancy on the grounds of ‘intended’ works. The case of S Franses Ltd v The Cavendish Hotel (London) Ltd highlights the protection afforded to tenants by the Landlord and Tenant Act 1954.

S Franses Ltd is a textile dealership and consultancy and occupied the ground floor and basement of premises, the rest of which was occupied and managed by the Respondent as a hotel.

The tenant’s 25-year lease was coming to an end and it served a Section 26 Notice requesting the grant of a new tenancy.

The landlord served a statutory Counter-Notice opposing the grant of a new tenancy under Section 30(1)(f) of the LTA 54 claiming that “it intended to demolish or reconstruct the premises…; or to carry out substantial work on the construction of the building or part thereof… he could not reasonably do so without obtaining possession of the holding”.

The issue to be determined at the Central London County Court had been whether the landlord could successfully oppose on this ground.

The landlord’s defence was unusual, they put forward successive schemes reflecting the works they proposed to carry out but accepted that the scheme of works was “designed with the material intention of undertaking works that would lead to the eviction of the tenant, regardless of the works commercial or practical utility and irrespective of the expense”.

_{The initial Court hearing}

At the initial hearing, the Court found that the landlord genuinely intended to carry out the works and that accordingly, it could successfully oppose the tenant’s application for a new lease. The tenant appealed and the Court of Appeal gave permission for the matter to go direct to the Supreme Court for a decision. ​

_{The Appeal}

The Supreme Court unanimously allowed the Appeal.

A Court of Appeal, consisting of Lady Hale (President), Lord Sumption, Lady Black, Lord Briggs and Lord Kitchin, gave a weighty judgement dealing with the following matters:

• Security of Tenure enjoyed by business tenants, pursuant to Part II of the Landlord and Tenant Act 1954.
• Section 24(1) of the Landlord and Tenant Act 1954.
• Section 30(1)(f) of the Landlord and Tenant Act 1954.
• Lease renewal.
• Statutory Counter-Notice opposing grant of a new tenancy.
• Could the landlord successfully oppose the grant of a new tenancy.

The reasons the Supreme Court gave are very instructive as to how these matters will be dealt with in the future.

The Court made the following statements of law:

• Ground F of Section 30 LTA 1954 requires a firm and settled intention to carry out the scheme of works. The landlords purpose or motive is immaterial and it is irrelevant whether a landlord’s intention is reasonable.
• The landlords approach could not satisfy Ground F because it was conditional in its intention to do the proposed works.
• Ground F assumes that the landlord’s intention to demolish or reconstruct the premise is obstructed by the tenant’s occupation.
• The intention to demolish or reconstruct the premises must exist independently of the tenants claim for a new tenancy.
  

Applying the above, on the facts of this case, the tenant’s possession of the premises did not obstruct the landlords intended works and the landlord did not intend to carry them out if the tenant persuaded the Court that the works could reasonably carried out while he remained in possession. The Court found that the entire value of the proposed scheme proposed by the hotel lay in removing the tenant and not in any benefit to be derived from the reconstruction itself. The Judge also found that Section 18 of the Estate Agents Act 1979 had not been complied with, but held it would be just to permit Mr Divani to enforce the agreement. However, he also held that Mr Wells should be compensated by a reduction in the fee that he was required to pay by one third.

_{Previous case law}

Lord Briggs stated that this decision does not depart from the long established rule laid down in by the House of Lords in Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd (No.1) [2959] (do we need this bit? – other sites do not cite this) that whether the landlord had the requisite intention to rely on Ground F falls to be assessed at the time of the Hearing, not at any early date. ​

_{​​More information}

Our Property Litigation Team regularly advise clients in these situations and have the experience and expertise to provide clear and insightful advice to both landlords and tenants. If you find yourself in need of advice on a tenancy renewal application, please contact us. ​This article was written by Stephen Eccles, Partner at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of April 2019.