S Franses Limited v The Cavendish Hotel (London) Limited

The Supreme Court have today handed down judgement in the case of S Franses Limited v The Cavendish Hotel (London) Limited. In this eagerly awaited judgment, the Supreme Court unanimously allowed the appeal of S Franses Limited.

The case concerned whether the landlord's redevelopment ground for opposing the renewal of a protected business lease (contained in s30(1)(f) of the Landlord and Tenant Act 1954 ("LTA 1954")) could be successful in preventing a lease renewal even if the scheme of works proposed was devised solely to satisfy the redevelopment ground, and prevent a lease renewal, but had no other commercial benefit and would not be undertaken if the tenant left voluntarily.

S Franses Limited (the "Tenant") occupied premises on the ground floor and basement of 80 Jermyn Street, and (under a separate lease) a storage area within 80 Jermyn Street. The remainder of the building was occupied  by The Cavendish Hotel Limited, (the "Landlord") as a luxury hotel.

The Tenant submitted a request for renewal of its leases of the premises under section 26 of the LTA 1954. This was opposed by the Landlord, who cited its intention to redevelop the premises, pursuant to s30(1)(f) of the LTA 1954 ("ground (f)"). It was made clear by the Landlord that its intention to redevelop the premises was motivated by the need to satisfy ground (f), but served no other commercial purpose. However the Landlord was prepared to give an undertaking to commence the works once vacant possession was obtained and ensure the works were completed.

The County Court accepted the Landlord's evidence, and accepted that the Landlord's motivation for the works was irrelevant. The Court held that as the Landlord had a settled intention to redevelop and the works were capable of implementation, ground (f) was satisfied.

The case was appealed by the Tenant, who made out 9 grounds of appeal. Relevant here is ground 1, which related to the fact that the Landlord's intention to carry out the works was conditional on the works being necessary to satisfy ground (f), and therefore argued that it was not a sufficient intention. The High Court dismissed the Tenants appeal on this ground, as although motivation can colour whether the Landlord's intention is genuine, in this case the undertaking to complete the works was held as sufficient. However, leave to appeal directly to the Supreme Court was granted.

The Supreme Court have now overturned the decision of the High Court, and held that ground (f) could not be established.

In his judgement, Lord Sumption found that a conditional intention, as was that of the Landlord, was not sufficient to establish the fixed and settled intention required by ground (f). He set out that "the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily", which was not the intention in this case.

The judgement follows the rule laid down by the House of Lords in the Betty's Cafe case. Lord Sumption stated that the landlord's motive or purpose are irrelevant in themselves, but may constitute "evidence for the genuineness of his professed intention".

The resolution of this case has settled the uncertainty surrounding the approach which the Court will take when considering if a landlord can rely on ground (f) to oppose a lease renewal.

The established principle of whether the landlord had a fixed and settled intention to redevelop is sufficient. Whilst this is the case, landlords need to ensure that their intention is not subject to conditions, as any conditions relating to the proposed works may jeopardise the genuineness of the landlords intention.