Ask not for whom the Bell (didn’t) toll: landlord’s possession claim under redevelopment ground (f) did not chime with the county court judge

Introduction

A county court case - Spirit Pub Company v Pridewell Properties - has provided an interesting illustration as to how courts are looking at applications under the Landlord & Tenant Act 1954 (the “Act”).   It concerns the Railway Bell public house (the “Railway Bell”) in South Woodford, which was built after the railway arrived there in the Victorian era. 

The landlord, a family property development company, had bought the freehold of the Railway Bell with a view to demolishing the pub and rebuilding it with some mews houses and flats.  The licenced premises would be considerably reduced in size and confined to the basement, with the beer garden also much reduced in size.  The landlord opposed a renewal application under the Act by the tenant and claimed possession under section 31(1)(f) of the Act, namely that it intended “to demolish or reconstruct the premises or carry out substantial work of construction on the holding and cannot reasonably do so without obtaining possession”.

The law

Ground (f) is one of the most contested grounds under the Act and the case law on it is complex.  The starting point for the landlord that is must have an actual intention to carry out its plans, the so-called “subjective intention”. 

The landlord had provided objective evidence of its intention to redevelop by seeking pre-application advice from the local planning authority on two occasions, one a good year before the tenant’s request for a renewal of its business tenancy was served.  The landlord then reduced the scope of its plans in line with the planning advice it had received.  The local planning authority had been minded to grant permission subject to the landlord producing an acoustic survey which showed how it would mitigate the effects of noise on the residential units.  The tenant however refused to allow access to the Railway Bell to carry out the survey, and the terms of the lease did not compel it to permit access for these purposes, and as such the landlord was unable to undertake the acoustic survey required by the local planning authority. 

This had an unfortunate knock-on effect for the landlord.  Without the necessary acoustic surveys, it could not secure a planning permission, and without planning permission, its existing lender would not provide a firm commitment to fund the development. 

Judgment

The court acknowledged that the landlord had shown the requisite level of intention to develop, nor did that intention founder on conditionality.  The test for conditionality laid down by the Supreme Court in Franses Ltd v Cavendish Hotel (London) Ltd [2019] was that if the intention to redevelop was motivated only by the landlord’s desire to get rid of its tenant, then the tenant would be successful in defeating ground (f). This was the not the case here. The court accepted the evidence of one of the directors of the landlord that the pub had been bought for its development potential.  It also accepted that planning permission would be more likely than not to be granted, subject to a satisfactory acoustic survey and a noise mitigation strategy, and that development would commence when the lease came to an end, or at least within an acceptable time after expiry.

However, the landlord fell at the last hurdle.  The landlord company was a family company with three brothers owning the share capital and acting as directors.  As is usual with small developments, the directors were likely to have been required to give personal guarantees by the lender.  One of them, the brother who had given evidence in the case and was the most enthusiastic proponent of the scheme had provided a guarantee, but there was no evidence that the other two brothers would do so.  That being the case, the judge found that the landlord had narrowly failed to prove its subjective intention required to satisfy ground (f).  It had been open to the landlord to procure personal guarantees from the other directors, and it had failed to. 

Comment

It is difficult not to feel a measure of sympathy for the landlord.  It had procured “in principle” financing for the scheme from its lender, although this was not contractually binding.  It had revised the scope of the scheme in response to planning feedback.  It could not proceed to obtaining full planning permission because it could not access the Railway Bell for required tests. 

The obvious lesson to be drawn is that landlords should seek to draft leases in a way that allows flexibility in access to the demised premises, just in case of any future requirements. They should also be meticulous in ensuring that their redevelopment plans are as watertight as possible.

It has not been possible to provide a link to the case, which does not seem yet to have been released to BAILLI.