Opposing a commercial lease renewal under the 1954 Act

Author: Alison Mould

Article 5 in our series of articles on the Landlord and Tenant Act 1954

This is the last in the series of articles on the Landlord and Tenant Act 1954 and the grounds upon which a landlord can oppose a renewal under that Act.  This article looks at the ground in section 30(1)(g), known colloquially as owner occupation.  The ground is as follows:

“On the termination of the current tenancy the landlord intends to occupy the holding for the purposes or partly for the purposes of the business to be carried on by him therein or as his residence”.

The section gives rise to three tests:

  • Who will be in occupation?
  • How much of the holding will be occupied?
  • Will that occupation be as a business or residence?

A landlord cannot rely on this ground if it has had an interest in the premises for less than five years.  The five-year period is calculated, backwards, from the date of termination specified in the section 25 notice or the section 26 request that has been served.  Any statutory “holding over” is ignored for the purpose of that calculation.

References to the landlord in this section include references, where the landlord is an individual, to any company in which the landlord has a controlling interest or, where the landlord is a company, to any individual with a controlling interest in the company.  In that situation either the landlord, the individual with the controlling interest or the company itself can be the entity intending to occupy.  Further, where the landlord is a company and belongs to a group of companies, any of the companies within the same group can intend to occupy to satisfy the ground.

The landlord only needs to occupy the holding, i.e. the parts of the premises demised to the tenant that are actually occupied by the tenant.  If, for example, the tenant is not in occupation of a number of outbuildings, then the landlord does not have to show that it intends to occupy those buildings, just the main building in which the tenant carries on its business.

The landlord must intend to occupy the holding on the termination of the current tenancy, which will obviously be a question of fact allowing for alterations, etc.

The landlord is entitled to intend to occupy either to carry on a business or for the purpose of a residence.  It should be noted, however, that if the landlord intends to carry on a business he only needs to carry on that business from part of the premises to succeed on ground (g), whereas if he intends to reside in the premises, he needs to reside in the whole of the premises.

Intention by the landlord is obviously a matter of fact.  It needs to be a firm and settled intention and the landlord needs to have a reasonable prospect of achieving that intention.  A tenant therefore would expect to see board minutes, planning permissions if necessary, contracts for any works for alterations that the landlord requires and details of financing to show the intention is genuine and settled.

Be aware, however, that an intention to occupy the premises, albeit as a residence or business for a short period of time, may mean that the landlord does not qualify under ground (g).  In a Court of Appeal decision the court held that a landlord who intended to occupy the premises for a period of five years to carry on its business had not shown a genuine intention to occupy for the purposes of its business.

If a landlord is successful in opposing a lease renewal using ground (g) then statutory compensation will be payable to the tenant.  That compensation is 1 x the rateable value of the property, or 2 x the rateable value where the tenant and any predecessor carrying on the same business have been in occupation for business purposes for 14 years or more.

Alison Mould, Partner, Fladgate LLP (amould@fladgate.com)

View by date:

View by author:

Would you like to hear more?