Renewal of Business Tenancies

When a business tenancy (lease) comes to an end, unless the tenancy has been specifically excluded from the provisions of sections 24-28 of the Landlord and Tenant Act 1954 (“the Act”) by a court order granted before the tenancy was made, then the Tenant generally has the right to a new tenancy because of the provisions of the Act.  There are limited grounds for opposition which the Landlord can raise to prevent the Tenant from obtaining a new tenancy.  These are set out in section 30 of the Act.  One of the grounds is that contained in section 30(1)(f) which is the ground favoured by Landlords who wish to redevelop the premises upon which the tenancy exists.  It provides that the Landlord may oppose the grant of a new tenancy if:

“on the termination of the current tenancy, the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding” (emphasis added)

The case of Merazzi v Global Grange Limited [2003] 34 EG 59 in the Court of Appeal has given greater comfort to developers/landlords wishing to rely upon this ground of opposition.  In this case the landlord owned a 2 star 60 bedroomed hotel which he wanted to refurbish to create a 38 bedroomed 4 star hotel with each room having en suite facilities.  The works were to cost £2m and were mainly non structural, comprising alterations of the internal stud partitioned walls and some minor structural work in the basement to create a lift.  The trial judge held that the works were not substantial work of construction and refused the landlord’s application.  It has been a commonly held view that substantial work required changes to the structure of a building.  The Court of Appeal did not allow the appeal because the trial judge did not make an error in law in coming to his decision.  Nevertheless, Park J giving the judgment of the Court of Appeal did say that “ I cannot say that his decision was wrong [although]… I can well imagine that if the question had been before me ….. I might have been persuaded that the conditions of paragraph f [of section 30(1) of the Act] did apply.”

Although the court emphasised that each case must be decided upon its own facts nevertheless landlords might now be emboldened to oppose the tenants application for a new tenancy with proposals for works which they may not previously have considered to be sufficient to enable them to obtain possession.

Article First Published: 16 November 2003

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