A recent decision has highlighted some of the difficulties that landlords face when renewing business tenancies under the Landlord and Tenant Act 1954 (the Act) particularly where a tenant is occupying property for both residential and commercial use.
The Act provides statutory protection for tenants who occupy property for the purposes of their business and gives such tenants the right to apply for a new lease of the property when their contractual term expires, unless the landlord can establish one of the grounds of opposition specified in section 30(1) the Act. Section 30(1)(g) allows a landlord to recover the property if it intends to occupy it for its own business or residential purposes.
If a landlord is relying on section 30(1)(g) to obtain possession it must have a clear and realistic intention to occupy the property for its own purpose and provide sufficient evidence to substantiate this intention. If a landlord does not intend occupying itself this will be difficult. This means that landlords will need to think carefully about what they are doing with the property following lease termination, if they want to want to successfully rely on section 30(1)(g).
The case also highlights the importance of the nature and extent of the occupation and control of the property, and how these factors may vary depending on the type and use of the premises.
In Royal Borough of Kensington and Chelsea v Mellcraft Ltd, the tenant was a company which had been granted a lease of a flat in Portobello Road by the landlord. The flat was occupied by the tenant's sole director and his family as their main residence. The tenant, through the sole director, also claimed to conduct its business of managing various other properties from the flat.
The landlord served a notice under section 30(1)(g) stating it would oppose the grant of a new lease because it intended to occupy the flat for its own business which was to provide temporary accommodation for homeless families.
The case raised two issues:
(1) had the tenant occupied the flat for the purposes of its business; and
(2) had the landlord satisfied section 30(1)(g) (and so could recover possession).
The High Court distinguished the tenant's occupation and use of the flat from, for example, a director who occasionally brings his work home. It found the tenant company had no other office premises and all the business carried on by it was conducted from the flat, where all the company's documents are stored. This was enough for the High Court to conclude there was business occupation for the purposes of the Act.
The High Court also agreed that the landlord had not satisfied the requirements of section 30(1)(g). This was because, on expiry of the tenant's lease, it intended to grant new tenancies to provide temporary accommodation for homeless persons, who would have exclusive possession of the flat. Consequently, the landlord would not retain any degree of control over the flat and so not be occupying itself. Interestingly, the court also commented that if the landlord had granted a licence it might have been sufficient to enable the landlord to rely upon section 30(1)(g).
