Lawbite: Guns at Dawn: own occupation and the 1954 Act

Overview

This County Court decision considers whether a landlord can rely on the own occupation ground under section 30(1)(g) of the Landlord and Tenant Act 1954 (“LTA 1954”) where it proposes to run a business from the premises using a highly structured management model, rather than through direct occupation by its own employees.

The Court held that Star Pubs Trading Limited (“Star”) had established a genuine intention to occupy the premises for the purposes of a business carried on by it, notwithstanding that day-to-day operations would be undertaken by an operator company under Star’s “Just Add Talent” (“JAT”) management services agreement (“MSA”). As a result, the tenant, Gunmakers Arms (Essex) LLP (“Gunmakers”) was not entitled to a new tenancy under Part II of the LTA 1954.

Landlords and tenants of business premises in England and Wales involved in lease renewals will be particularly interested in this decision.

Background

The defendant tenant, Gunmakers, occupied the premises under a lease protected by Part II of the LTA 1954. Star served a section 25 notice opposing renewal on the basis that it intended to occupy the premises for the purposes of its own business under section 30(1)(g).

Star’s evidence was that, on termination of the tenancy, the pub would be incorporated into its JAT estate, under which Star retains ownership and control of the business with an independent operator engaged under an MSA to manage operations and employ staff on Star’s behalf.

The landlord’s intention

The Court confirmed that a landlord must demonstrate both a fixed and settled intention to occupy and a reasonable prospect of achieving that intention within a reasonable time.
On the evidence, the Court was satisfied that Star met both limbs. The JAT model was already established across its estate, internal approvals pre-dated service of the section 25 notice, and there was no practical impediment to implementation.

Did the proposed arrangement amount to own occupation?

The key issue was whether occupation through the MSA amounted to occupation by Star or by the operator. Applying relevant authority, the Court emphasised that occupation is a matter of fact and that physical presence by a landlord’s own staff is not decisive.

The Court placed particular emphasis on the “striking level” of control retained by Star over the business under the MSA, including pricing, branding, marketing, staffing and operating requirements. Also of significance was the absence of hallmarks of a tenancy such as rent, repairing obligations or restricted access. The Court concluded that the proposed JAT arrangements amounted to occupation by Star for the purposes of a business carried on by it.

On concluding that Star had successfully opposed renewal on ground (g) of the LTA 1954, the Court ordered termination of Gunmakers’ tenancy without the grant of a new lease.

Takeaways

• The decision doesn’t offer new law but provides helpful practical guidance on the court’s approach to ground (g) of the LTA 1954;
• Own occupation can be established even where operations are delegated, provided the business is carried out on the landlord’s behalf;
• The degree of control retained by the landlord will be critical;
• Absence of classic tenancy indicators strongly supports an agency analysis;
• Physical occupation by an operator’s staff is not, of itself, determinative;
• This is a County Court decision and therefore non-binding