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In the recent property litigation case of Man Limited v Back Inn Time Diner Limited, the Court considered the evidential burden on the landlord in opposing a lease renewal under the Landlord and Tenant Act 1954 (“the 1954 Act”).
Under the 1954 Act, a tenant has a statutory right to a new tenancy unless the landlord can establish one of seven grounds of opposition to the renewal.
A frequently used ground of opposition is Ground (f), where the landlord must show that on the termination of the current tenancy, it intends to demolish or reconstruct the premises or carry out substantial construction work which could not be undertaken without obtaining possession of the property.
Successful under Ground f
To be successful under Ground f, a landlord must show a firm and settled intention to carry out the redevelopment (subjective intention) and a reasonable prospect of achieving that intention (objective intention).
The Courts apply the “realistic prospect” test to the objective limb, meaning that a landlord has to stand a “real chance” rather than a “fanciful” chance of achieving the intention. The more advanced the landlord’s redevelopment plan is, the better the landlord’s position.
To evidence its intention, a landlord should generally take steps to obtain/implement planning permissions, building contracts and financing.
Man Limited v Back Inn Time Diner Limited
In this case, the tenant ran a diner from the property, but the landlord wanted to redevelop the premises into a multi-storey mixed-use development.
The landlord had previously applied for planning permission, but that had been refused. The landlord had appealed that refusal and, as of the date of the hearing on Ground (f), was still awaiting the results of that appeal.
In the first instance lease renewal hearing, the judge found against the landlord because the landlord did not have any real prospect of obtaining the planning permission and had not provided sufficient evidence of finance for the development.
However, after the draft judgment was handed down (but before the final judgment was circulated), the landlord’s planning appeal was successful. The judge dealing with the lease renewal maintained his ruling, and the landlord appealed on four grounds.
Ground of appeal
The landlord was refused permission to appeal on two of those grounds and granted permission to appeal on the following grounds:
1. That the first instance judge was wrong in his decision to consider bank statements showing firm evidence of funding.
The landlord had failed to disclose bank statements demonstrating funding until the start of the trial. The trial judge had refused to admit these statements as evidence.
The appeal judge found that the trial judge was correct in his finding, and the landlord’s appeal was dismissed. The failure of the landlord to disclose the evidence was serious, there was no good reason for it, and the trial judge had considered prejudice.
The appeal judge also found that the trial judge had not made any error in failing to refer to documents evidencing the landlord’s ownership of other property.
These properties were not referred to in witness statements, and there was little, if any, link between these properties and any prospect of them being used as security to assist with funding the development.
2. That the judge had set the threshold too high when considering the evidential burden on the landlord regarding funding.
The landlord claimed that when considering funding, the trial judge had repeatedly referenced the landlord having to be able to provide that it “would be able to fund the development” rather than “having a real prospect” of funding the development.
The appeal judge acknowledged that the language used by the trial judge in the judgment could be inferred as applying a higher threshold concerning the funding.
However, when reading the judgment as a whole, the appeal judge was comfortable that the trial judge had the right test in mind when making the judgment, and the appeal was dismissed.
Take away points
- This case acts as a reminder that the test to be applied when considering a ground of opposition (such as Ground (f) or (g)) is whether the landlord has a “real” rather than “fanciful” prospect of (for example) obtaining planning permission or funding.
- The test is not whether the landlord “will be able” to implement the intention but whether it has a “realistic prospect” of doing so.
- Finally, though the hurdle on intention is low, in evidencing funding, a landlord should be aware that they need to show a connection between ownership and the ability to obtain security over that property. Simply providing evidence of ownership of such property will not be sufficient.