To occupy or not to occupy (for the purposes of a landlord’s business) that is the question

Summary

The High Court has dismissed a novel argument that section 30(1)(g) of Part II of the Landlord and Tenant Act 1954 (the “Act”) cannot apply where the landlord intends to continue “essentially the same business” thereby depriving the tenant of any goodwill attached to the premises in contravention of the tenant’s right to property under article 1 of the First Protocol of the European Convention on Human Rights (“A1P1”).

The decision suggests that similar arguments raised by tenants are unlikely to be successful, as the Court found that section 30(1)(g) strikes a fair balance between a right of renewal and a right of repossession.

Other guidance was given in relation to arguments that there were too many legal obstacles in the way for the landlord to be able to carry on his own business.

The decision will be of particular interest to landlords and tenants of commercial properties in England and Wales. 

Landlord's opposition

The case involved Sheffield’s iconic music and nightclub venue, The Leadmill.

In March 2022, the landlord served notice under section 25 of the Act, opposing a new tenancy under section 30(1)(g) as the landlord intended to occupy the premises for its own business.

The intention to occupy

The Court found that the section 30(1)(g) grounds had been established, following strong evidence from the landlord of its intention to operate a live entertainment business from the venue. The Court dismissed the tenant’s claims that the landlord could not fund the refurbishment works and that the length of the works prevented the landlord from demonstrating an intention to carry on the business “on the termination of the current tenancy” as required by the Act.

The Court reaffirmed the decision in Humber Oil Terminal Trustees Limited v Associated British Ports [2011] L&TR 27 that “landlords should be entitled to their land back, notwithstanding the tenant’s security of tenure, if they genuinely wish to use that land for their own business purposes…or for redevelopment”.

Human Rights arguments

The Court also dismissed the tenant’s argument that, since the landlord intended to run “essentially the same business” from the premises, the Court was prevented from granting an order for possession on the grounds that this would deprive the tenant of the goodwill attached to the premises, thereby violating their A1P1 rights.

The Court held that, even if the tenant had been able to prove any notional goodwill, the tenant could not be deemed to have been unlawfully deprived as the tenant’s right to renewal under the Act was contingent on the landlord successfully establishing that the grounds under section 30(1)(g) had been met.

The Court concluded that, even if it were wrong on this point, any interference would be in the public interest, provided for by law, and therefore in line with A1P1.

Key points

• taking a property back as a landlord for its own business remains a reasonably clear and settled area, notwithstanding this Human Rights challenge
• the Court emphasised that the words “on termination” in section 30(1)(g) are to be read as including “or within a reasonable time thereafter”. What amounts to a reasonable time here will depend upon the condition of the premises at the end of the lease
• a landlord doesn’t need to show that his business may be viable
• goodwill could, in principle, be considered a “possession” under A1P1, provided it was an asset with monetary value
• goodwill must be proven and not merely asserted, with the burden on the tenant to demonstrate its existence. Evidence demonstrating a future income stream does not constitute a present “possession” for the purposes of A1P1
• even if the tenant is deprived of any goodwill, it would have been interfered with in a way that is proportionate and which balances the competing property interests

Written by Will Densham and Nia Williams.