A potted guide to covering ground (g)

Jonathan Seitler QC is your guide through the basics of the law relating to a landlord resisting a tenant’s claim to renew a business lease, under ground (g) of the Landlord and Tenant Act 1954 This Potted Guide covers: ■ What must a landlord show to establish ground (g)? ■ Who is the landlord for the purposes of ground (g)? ■ What counts as occupation for the purposes of ground (g)? ■ What type of occupation must be intended? ■ What is “the holding” for the purposes of ground (g)?a ■ At what time is the necessary intention under ground (g) judged? ■ What certainty of intention need a landlord have to succeed under ground (g)? ■ What are the provisions for statutory compensation? ■ What is the five-year bar? What must a landlord show to establish ground (g)? The landlord must prove (the onus being on the landlord) that on the termination of the current tenancy it intends to occupy the holding for the purposes or partly for the purposes of a business to be carried on by him therein or as his residence. Who is the landlord for the purposes of ground (g)? This is an issue that arises surprisingly often, largely because the definition of “landlord” is much wider than might at first be imagined. The position can be summarised as follows: (a) The landlord for the purposes of ground (g) is the competent landlord within the meaning of section 44(1) of the Landlord and Tenant Act 1954. This is the owner of the interest in reversion expectant (whether immediately or not) on the termination of the relevant tenancy that is either the fee simple or a tenancy which will not come to an end within 14 months by effluxion of time and, if it is such a tenancy, that no notice has been given bringing it to an end within that period or any further time extended by the Act; (b) The “landlord” in ground (f) includes an agent of the landlord or a manager acting on its behalf: see Cafeteria (Keighley) Ltd v Harrison (1956) 168 EG 668, CA. It also includes a company in which the landlord (if an individual) has a controlling interest (so long as that person acquired it more than five years before the termination of the existing tenancy): section 30(1A) provides that references in section 30(1)(g) to “landlord” are in that situation construed as references to the landlord or that company (so controlled); (c) Where there are joint landlords, “landlord” means both (or all) of them. In such a situation all of the landlords must require the premises for their occupation within the meaning of ground (g): Weatherall & Co v Stone [1950] 2 All ER 1209, CA; (d) Where the landlord’s interest is held by a member of a group, the landlord is able to succeed in opposing renewal under ground (g) if any member of the group intends to occupy the holding for the purposes of a business to be carried on by that member: see section 42(3). Under section 42(1), two bodies corporate are members of a group if one is a subsidiary of the other or both are subsidiaries of a third body corporate. “Subsidiary” in this context carries the meaning given to it by section 1159 of the Companies Act 2006: a company is a subsidiary of another (its “holding company”), if that other company: (a) holds a majority of the voting rights in it; or (b) is a member of it and has the right to appoint or remove a majority of its board of directors; or (c) is a member of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it; and (e) Where the landlord’s interest is comprised in a trust, section 41(2) provides that references to the landlord’s occupation under ground (g) includes references to the occupation by all or any of the beneficiaries of the trust. MORE POTTED GUIDES: Jervis v Harris clauses What counts as occupation for the purposes of ground (g)? The term is not defined specifically but its meaning is likely to be the same as under section 23(1), namely that as a matter of fact there is some business activity carried on by the tenant on the premises. It involves “an element of control and user involved in the notion of physical occupation…. not physical occupation every minute of the day, provided the right to occupy continues”: see Hancock & Willis (a firm) v GMS Syndicate Ltd [1983] 1 EGLR 70. What type of occupation must be intended? Generally, it must be occupation for the purposes of a business. However, that does not mean that the business to be carried on must be carried on only by the landlord. In Re Crowhurst Park [1974] 1 WLR 583 the landlord proved that he intended to occupy the holding for the purposes of a business to be carried on by himself and his wife in partnership. It was held that where two persons carry on business in common as partners, each of them occupies the firm’s premises and each of them carries on business there, so that the landlord (the man) had established the necessary intention. The same result occurred on similar facts in Skeet v Powell-Sheddon [1988] 2 EGLR 112, CA. What is “the holding” for the purposes of ground (g)? The 1954 Act defines the “holding” as the part of the premises that the tenant occupies for the purpose of its business. However, an intention on the part of the landlord to occupy a substantial part of “the holding” for its business will still satisfy ground (g): see Method Developments Ltd v Jones [1971] 1 WLR 168. The position, however, is different in relation to occupation by the landlord for his or her own residence, where, because of the wording of ground (g), the landlord must be intending to occupy the entirety of the premises as his or her residence. MORE POTTED GUIDES: Estoppel by convention At what time is the necessary intention under ground (g) judged? (a) The intention must be proved as at the date of trial: Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20. This usually means the trial of the preliminary issue as to whether the landlord can rely on ground (g): Dutch Oven Ltd v Egham Estate & Investment Co Ltd [1968] 1 WLR 1483; (b) The date which counts as “on the termination of the current tenancy” is the later of three months after the date that the claim under the Act is “finally disposed of” as per section 64 or the date specified in the section 25 notice or the section 26 request; (c) This means three months after the time to appeal any order has expired, which is 21 days after the order is made, if not extended under CPR 52.4(2). There is then some further leeway after that – it actually means within a reasonable time of the termination of the tenancy. Inevitably, a bit of leeway is given for reasonable adjustments such as works the landlord needs to carry out to effect its own occupation: see, by analogy, Livestock Underwriting Agency Ltd v Corbett and Newson Ltd [1955] 165 EG 469. What intention need a landlord have to succeed under ground (g)? The position is similar to that under ground (f) – it is not exactly the same because under ground (g) there is less imperative on a landlord to show the viability of its proposal: see Dolgellau Golf Club v Hett [1988] 2 EGLR 75. The landlord must show, as at the date of the hearing, two things – first, that the plan for it to occupy has a history and that it has evolved in a normal, credible way; second, that there is an ability to bring it about. The first requires showing how the plan for the landlord itself to occupy has come about, with documents such as board minutes showing that the idea has verisimilitude. The landlord’s intention must have moved “out of the zone of contemplation” and into “the valley of decision”: Cunliffe v Goodman [1950] 2 KB 237. The second involves showing the ability to bring about the landlord’s own occupation. This means that there is no insurmountable hurdle as regards logistical matters such as planning and funding: see Humber Oil Terminals Trustee Ltd v Associated British Ports [2011] EWHC 2043; [2011] PLSCS 205. In cases of doubt, an undertaking from the landlord to the court to occupy for the purposes of its own business on termination of the current tenancy might swing it in favour of the landlord, though in general terms such undertakings are not regarded as weighty as those given in a ground (f) case: see Lennox v Bell (1957) 169 EG 753, CA and Lightcliffe v Walton [1978] 1 EGLR 35, CA, because, for one thing, the court will normally be reluctant to enforce an order requiring something like trading as a business from particular premises, which would need constant monitoring. MORE POTTED GUIDES: Ground (d) – offering alternative accommodation What are the provisions for statutory compensation? Statutory compensation is available to a tenant where the landlord successfully opposes renewal of the lease on ground (g). The compensation is a multiplier of the rateable value of the property. What is the five-year bar? This is unique to ground (g). Under section 30(2), the landlord is barred from relying on ground (g) if, as competent landlord, it has purchased its interest in the premises, or such interest has been created, for less than five years measured backwards from the date of termination of the current tenancy, as specified in the relevant section 25 or 26 notice or request. The rule, however, does not apply to inter-group transfers (group companies as set out above) so that if the landlord acquired its interest from a group company within the last five years, the rule will not bite. Can the landlord combine opposition to a new tenancy under ground (g) with opposition under ground (f)? Yes, especially where substantial works need to be done to accommodate the landlord’s own occupation. Jonathan Seitler QC is a barrister at Wilberforce Chambers