The answer to this question will depend on whether your lease is protected by the Landlord and Tenant Act 1954 ("the 1954 Act").
If the lease has the 'protection' of Part II of the 1954 Act, the business tenancy will not end unless terminated under the 1954 Act.
Our Property Litigation Lawyers and Retail Team analyse the case of Sainsbury's Supermarkets v Medley Assets Limited and explain how navigating the complexities of lease renewals and redevelopment intentions can be challenging for landlords and tenants.
Lease Protection and Termination Under the 1954 Act
For a landlord to terminate such a business tenancy, the landlord must serve a notice stating that it will either oppose or not oppose the tenant's application for a new tenancy.
Where a landlord opposes a new tenancy, this can be difficult for tenants, as the premises are often an important part of their business, particularly in the retail sector, to ensure its success and the costs of relocation can be expensive and disruptive.
Where a landlord opposes the grant of a new tenancy, the landlord must rely on one or more of the statutory grounds to regain possession under section 30(1) of the 1954 Act, for example, the intention to redevelop the site.
Compensation is payable to the tenant if the landlord can satisfy a statutory ground.
However, this still may not overcome the disruption caused to the business.
In Sainsbury's Supermarkets v Medley Assets Limited, the landlord attempted to rely on the statutory ground of redevelopment. However, the landlord's plans were not well thought out.
Sainsbury's Supermarkets v Medley Assets Limited
In this case, HHJ Richard Roberts decided an important point of law regarding the extent of 'the holding' for opposed lease renewals and also made observations about the quality of expert and factual evidence required to support a ground (f) opposition by a landlord (this is opposing the grant of a new lease because the landlord wants to redevelop).
Facts of Sainsbury's Supermarkets v Medley Assets Limited
Sainsbury's is the tenant of the property situated on Kentish Town Road, London, and they operate a supermarket from the ground floor.
The demised property also includes upper floors, previously used as offices but now vacant. The basement of the property has also been vacant for some time.
The landlord, Medley, wants to redevelop the property. Medley's original plan, shown in the granted planning permission, was to convert the upper floors into flats.
The landlord served a notice under section 25 of the 1954 Act seeking to end the tenancy and opposing the grant of a new tenancy on the basis of ground (f) of section 30 (1) of the 1954 Act.
At some point, Medley decided not to proceed with the proposed development of the flats. Instead, by the time of the trial, Medley decided to carry out works to the basement, which had separate planning permission, to refurbish the office spaces on the upper floor and widen the staircase on the ground floor.
The work on the ground floor would have intruded into Sainsbury's demised property, which was previously used for stock storage. It is understood that the week before the trial, Sainsbury's vacated this area only and continued occupying the remainder of the ground floor.
The extent of the holding
Whilst the entirety of the property is demised to Sainsbury's, it only trades from the ground floor. Until the start of 2024, Sainsbury's had occupied the entire ground floor. Medley argued that, it had invoked section 32(2) of the Act, which required Sainsbury's to take a lease of the original demise.
For the purpose of ground (f), "holding" is interpreted as the whole of the demised property, including the areas that Sainsbury's no longer occupies.
The Judge, however, agreed with Sainsbury's submission that the "holding" for the purpose of ground (f) was the occupied part of the demised premises as at the date of the hearing. As none of Medley's proposed works were to the "holding", Medley could not rely upon ground (f).
Furthermore, the Judge went on to make findings about the landlord's intention to carry out the works and whether it would have satisfied ground (f) of the 1954 Act.
Intention of work
The Judge held that the landlord did not have a genuine intention to carry out the proposed works, as the factual evidence undermined this.
- The contemporaneous documents supported the finding that the works were only contemplated by the landlord after the notice was served.
- Despite extensive documents, the plans did not match the realistic plans for the works. For example, there were no access routes for machinery or materials.
- The works had not been completed more than two years after the completion date was set.
What are the lessons?
This decision may be beneficial for a commercial tenant who wishes to defeat a landlord's reliance upon the mandatory grounds in s.30(1) of the 1954 Act.
A tenant could up, upon scrutinising the landlord's evidence ID, entity any part of the demised premises to which the landlord is not undertaking works and which would fall within the ground (f) the tenant can move its business into that part of the premises before trial. As such, the landlord would not be able to satisfy the ground.
Furthermore, landlords need to be aware of the possibilities for tenants and remember that they must plan carefully and detail any works to be carried out on the property in order to prove ground (f) and show the necessary intention.
Contact Our Retail Solicitors
For more legal advice regarding Commercial Leases and Commercial Property Disputes within the retail sector, contact our Retail Team on:
01619414000
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Jennifer Hartley
Senior Associate
Jennifer qualified as a solicitor in January 2020 after completing her training with a specialist real estate firm. She joined Myerson upon qualification and has since become an integral part of the Property Litigation team, applying her expertise to a diverse range of contentious property matters.
Her practice covers a broad spectrum of issues, including TOLATA claims, residential and commercial landlord and tenant disputes, lease renewals, forfeiture, and advising on the right of first refusal. She also regularly advises on lease extensions and enfranchisement matters, guiding individuals and property owners through often complex statutory processes.
About Jennifer Hartley