The recent decision in the case of Sainsbury’s Supermarkets Limited v Medley Assets Limited has highlighted again the need for a carefully managed and somewhat agile approach to the question of whether the landlord is successfully able to contest a lease renewal under Section 30(1)(f) of the Landlord and Tenant Act 1954 on the grounds that it intends to demolish or reconstruct the premises or to carry out substantial works of construction at the premises of a substantial part of those and that it could not do so without obtaining possession of holding.

Facts of the Case

Briefly, Sainsburys are the tenant of premises on Kentish Town Road and occupied as a supermarket, the ground floor of the premises. The premises however, under the terms of the lease also comprised the upper floors which were used as offices but at the time of the case coming before the court, were vacant. Sainsburys occupied pursuant to a lease protected by the Landlord and Tenant Act 1954.

The landlord, Medley Assets wanted to redevelop the Premises and served a notice under Section 25 of the Landlord and Tenant Act 1954 seeking to terminate the tenancy and refusing the grant of a new one on ground (f). Medley’s original plan appears to have been to refurbish the upper floors to create flats but later this plan appears to have been abandoned and Medley then required the premises so that it could convert the upper floors into office space. Medley argued at the trial of the preliminary issue, as to whether it had the necessary intention under ground (f), that it needed to occupy the ground floor in order to widen the staircase in order to service the offices on the upper floors. The problem being, that the proposed works only intruded into a comparatively small space on the ground floor.

A week before trial, Sainsbury’s vacated the area which the landlord required to carry out its works.

It was successfully argued on behalf of Sainsburys at trial that the extent of the holding, was limited to the area which they actually occupied at the date of the hearing (under Section 32(1) of the Landlord and Tenant Act 1954), and therefore Medley did not require Sainsburys to vacate in order to carry out the proposed works.

HHJ Roberts held that what is considered as a holding for the purposes of the 1954 Act is limited to the area Sainsbury’s were occupying at the date of the hearing and Medley had not established that it needed possession of the holding to carry its works.

Medley’s problems were compounded by a lack of evidence as to a settled and genuine intention to carry out any of the proposed works as required by Ground (f).  HHJ Roberts found that Medley had not finalised their scheme of work until after the notice was served, and their expert evidence in support of their position lacked credibility and was not a realistic plan for the works in as far as it lacked detailed evidence of access routes for machinery and materials and also may have contravened fire regulations.

Works had not been commenced for more than two years, notwithstanding planning permission was already granted and funding for the project was in place.

Points to Look Out For

The definition of a holding for the purposes of opposing a lease renewal on ground (f) under Section 30(1) of the Landlord and Tenant Act 1954 can be confined to the area which the tenant is occupying at the time of the hearing. This can, as can be seen from this case, be adjusted throughout the life of a case, and landlords need to remain alert and agile to respond to this and assess at every stage, whether possession of the entire or indeed any part of the holding being occupied by the tenant, is needed for their purposes.

Playing a “tick box” exercise, in terms of establishing a firm and settled intention to carry out demolition and reconstruction works is unlikely to be sufficient to successfully establish the required intention. A scheme of works should be decided upon prior to the service of a contested notice and firm evidence of works being commenced where appropriate or an undertaking to commence the work should be considered in circumstances where this is not practical.

For further guidance on serving a contested notice under the Landlord and Tenant Act 1954, please contact us.