Until 1 June 2004, the Landlord and Tenant Act 1954 enabled business tenants to claim compensation from landlords whose misrepresentations led the court to refuse to order the grant of a new tenancy. The rules did not apply where a tenant vacated property without a court hearing.
The Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 modernised the 1954 Act. It introduced new provisions conferring additional rights on tenants, including claims for compensation from landlords whose misrepresentations induce them not to apply to the court or, alternatively, to withdraw an application for the renewal of a business lease.
Until 1 June 2004, the Landlord and Tenant Act 1954 enabled business tenants to claim compensation from landlords whose misrepresentations led the court to refuse to order the grant of a new tenancy. The rules did not apply where a tenant vacated property without a court hearing. The Regulatory Reform (Business Tenancies)(England and Wales) Order 2003 modernised the 1954 Act. It introduced new provisions conferring additional rights on tenants, including claims for compensation from landlords whose misrepresentations induce them not to apply to the court or, alternatively, to withdraw an application for the renewal of a business lease. Inclusive Technology v Williamson [2009] EWCA Civ 718; [2009] PLSCS 244 appears to be the first reported decision under the new rules. The landlord served a section 25 notice informing the tenant that, on the termination of the tenancy, it intended to demolish or reconstruct the premises or to carry out substantial work to the holding. The landlord sent an accompanying letter explaining that he would need vacant possession. The landord’s intention was genuine, but he subsequently decided to re-market the premises because of concerns over the cost of the work. He did not inform the tenant of the change of plan. The tenant relocated to other premises and issued proceedings for compensation when it discovered that the work had not been carried out. The Court of Appeal accepted that a statement of intention is not necessarily a statement of continuing intention, but ruled that the landlord had made a continuing representation that had become false, and awarded the tenant compensation under section 37A. Importantly, however, the court ruled that the representation did not emanate from the service of the section 25 notice but from the landlord’s accompanying letter (which had to be read in the context of the previous discussions between the parties). When the representation became false, the landlord had been under a duty to correct it. How then should practitioners advise landlords? The judgment confirms that a section 25 notice acts as a warning; it must be given in good faith, but does not, of itself, amount to a representation of the landlord’s intention: Betty’s Cafes Ltd v Philips Furnishing Stores Ltd [1959] AC 20. Consequently, landlords can safely serve a hostile section 25 notice, but should say as little as possible to tenants regarding plans that are liable to change. However, landlords will be relieved that the court accepted that they are entitled to explore other commercial options while, at the same time, progressing plans for reconstruction or refurbishment. In addition, the court confirmed that landlords are not under a general duty to update tenants on progress in respect of any planning applications or negotiations with third parties. Interestingly, compensation is not available to landlords under the 1954 Act should tenants mislead them over an their intention to renew a lease or conceal material facts to secure the grant of a new tenancy. Allyson Colby is a property law consultant
