Landmark decision on Ground (f): S Franses Ltd v The Cavendish Hotel (London) Ltd

The Supreme Court has today released its first decision on the Landlord and Tenant Act 1954, S Franses Ltd. v. The Cavendish Hotel (London) Ltd. The Court had to resolve two critical issues on the meaning of “Ground (f)”:

• Whether a landlord which intends to carry out works if, and only if, those works are necessary to satisfy s 30(1)(f), has the requisite intention for the purposes of ground (f); and
• Whether a landlord whose sole or predominant commercial objective is to undertake works in order to fulfil ground (f) and thereby avoid the grant of a new lease to the tenant, has the requisite intention for the purposes of ground (f).

In the County Court, the judge had found that the landlord had made out its “intention” to undertake works within Ground (f), even though it frankly admitted in evidence that the works it intended to carry out had no purpose other than to obtain possession from the tenant and would not be undertaken if the tenant had left voluntarily, prior to the trial. The Supreme Court held agreed with the County Court and the High Court on Appeal that the landlord's purpose or motive are irrelevant save as material for testing whether a firm and settled intention exists for the purposes of Ground (f).  It also agreed that the protection conferred on the tenant by the 1954 Act was “no more than a qualified security”.  Accordingly, the landlord had a right to demolish or reconstruct his property in whatever way he chose at the expiry of the term. However, none of those considerations availed the landlord, on the facts.  Lord Sumption, giving the leading judgment, held that the landlord’s proposed works were not of the nature or quality of the intention that ground (f) requires. The entire value of the works proposed by this landlord consisted in the benefit to the landlord of obtaining possession from the tenant. There was no benefit to be derived from the works themselves. Lord Sumption continued:

The commercial reality is that the landlord is proposing to spend a sum of money to obtain vacant possession. … The result is that no overriding interest of the landlord will be served which section 30 can be thought to protect. The right to obtain vacant possession on the expiry of the existing term, which is all that the landlord is getting for his money, is not in itself an interest protected by section 30. On the contrary, in a case where the parties have not agreed to contract out of statutory protection, it is the very interest that Part II of the Act is designed to restrict.

Lord Sumption went on to hold that the drafting of s.30(1)(f) and s.31A showed that the landlord’s intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim to a new tenancy, so that the tenant’s right of occupation under a new lease would serve to obstruct it. The landlord's intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim. The “acid test” is whether the landlord would intend to do the same works if the tenant left voluntarily. Lord Briggs added that in many cases, the testing as to whether the landlord's intention was conditional would “probably give rise to factual questions of some nicety, incapable of resolution by the proffer of a simple undertaking to the court, as happens at present”, and that that consideration “may introduce an element of complexity and expense into proceedings in the County Court which, for many years, have yielded to a simple technique for speedy resolution.” Nic Taggart acted for the landlord, led by Guy Fetherstonhaugh QC of Falcon Chambers.