Q&A: A matter of intention

Lauren Kelly and Camilla Lamont consider the challenge of proving a landlord’s misrepresentation in an opposed lease renewal. Question Last year our former landlord successfully obtained a termination order in respect of our most profitable store under the Landlord and Tenant Act 1954, relying on the ground in Section 30(1)(g), its evidence at trial being that it intended to occupy the premises for the purpose of operating a high-end burger bar. The landlord never opened a burger bar and is operating a juice and smoothie café from the premises. What, if anything, can we do about this? Answer You may be able to claim compensation under Section 37A of the 1954 Act if you can show that the landlord did not intend at the date of trial to open the burger bar in the manner represented to the court. If, however, your landlord genuinely did intend to open the burger bar but later simply changed its mind, any claim for compensation will fail. The key factor is the landlord’s intention at trial. Explanation Section 37A of the 1954 Act provides that, where a court makes a termination order or refuses an order for the grant of a new tenancy and it is subsequently made to appear to the court that the order was obtained or the court was induced to refuse the grant by misrepresentation or the concealment of material facts, the court may order the landlord to pay the tenant compensation for damage or loss sustained as a result. In order to have obtained possession on the basis of ground (g), the landlord would have needed to prove that on the termination of the tenancy it intended to occupy the premises for the purposes (in whole or part) of a business to be carried on by it. To satisfy ground (g), the landlord’s intention (which is to be established at the date of trial) must be firm and settled. The more detailed and advanced a landlord’s plans are, the more likely it is that it will establish the required intention. Although your landlord is operating a business from the premises, this is a different business from that which it said it intended to operate when giving evidence. If your landlord has honestly changed its mind after judgment, you will have no remedy. In order to obtain compensation it will be necessary to show that the landlord misrepresented its specific intentions when giving evidence. In McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch); [2024] PLSCS 91, the court held that the defendant landlord had obtained a termination order by misrepresenting its intentions in both its evidence and an undertaking given to the court. In that case, the judge’s findings at trial had been made on the basis of the defendant’s evidence that it had the specific intention of opening a high-end restaurant called Zen Bento. It subsequently opened a different type of Japanese restaurant and an English bakery from the premises. The court held that the defendant had deliberately and recklessly misrepresented its intentions at the original trial. Its evidence that it had specific plans to open Zen Bento did not represent the true position, but rather was put before the court for the purpose of obtaining possession. The landlord had, in fact, intended to keep its options open in terms of what it would do with the premises once it had recovered them. The difficulty, therefore, will be in establishing that your landlord did not intend to open a burger bar as evidenced at trial. The burden will be on you as tenant to demonstrate that the landlord had no such intention and that either its intention was something else entirely or that the landlord was “keeping its options open” as to its future plans for the premises. The landlord will have a clear defence to any such argument if it can evidence that it did have a firm and settled intention at that time but that it later changed its mind as a result of some other factor. It is likely that disclosure will therefore form a key part in any such claim. Disclosure was particularly important in McDonald’s, as e-mails exchanged shortly after judgment was handed down highlighted that the landlord never in fact had a clear and settled intention to open Zen Bento in the manner represented to the court. Instead, numerous e-mails were exchanged discussing various options for the space once the landlord had taken back possession. Further, even if a court were to determine that your landlord had misrepresented its position simply to obtain possession, any remedy would be limited to financial compensation (as opposed to repossession of the premises). In addition, for compensation to be awarded you will need to be able to evidence that you have suffered loss as a result of the termination order for which the landlord was responsible. Lauren Kelly is an associate in the real estate disputes team at Charles Russell Speechlys LLP and Camilla Lamont is a barrister at Landmark Chambers. Image © Pariwat Pannium/Unsplash