The Landlord and Tenant Act 1954 (the Act) gives business tenants the right to renew their lease at the end of the term, often referred to as “security of tenure”.  The Act applies to leases with a term of more than 6 months and to tenants who are in occupation of premises for business purposes.

However, the Act sets out several grounds upon which a landlord can oppose the grant of a renewal lease.

Parties can of course choose to contract out of the Act.

The Law Commission is due to review the Act later this year and consider whether it is still fit for purpose.

Two recent cases, summarised below, highlight the complexities of the current legislation.

The first case is Sainsbury’s Supermarkets Limited v Medley Assets Limited [2024] in which Sainsbury’s fought off the landlord’s opposition to a new lease. Although a County Court decision, it supports a potentially radical way for a tenant to defeat a lease renewal opposition based on redevelopment.

The landlord opposed a new lease based on ground F “the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.”

Sainsbury’s lease included ground floor premises, used as the shop, as well as basement and upper floors, which, importantly, were unoccupied by Sainsbury’s.

The landlord proposed works related to the upper floors and basement with some minor alterations to the ground floor shop, and none to the front of the shop. The week before the trial Sainsbury’s move all their operations to the front of the ground floor shop. 

The primary reason for the landlord’s defeat was because the landlord failed to prove a genuine and settled intention to carry out the works.

Notably however, Sainsbury’s successfully argued that when assessing ground F, only the part of the premises which the tenant is occupying at the time of the preliminary hearing is relevant. Sainsburys was only occupying the front of the ground floor – to which the landlord intended to do no work.

For a more detailed analysis of this case please read our Case Review of Sainsbury’s Supermarkets Limited v Medley Assets Limited [2024]

The second case is Royal Borough of Kensington & Chelsea v Mellcraft Ltd [2024], an appeal which considered when a person is in occupation for business purposes under the Act.

The Royal Borough was the landlord and Mellcraft the tenant of the first and second floors of the property (the flat). Mellcraft’s director lived in the flat and conducted Mellcraft’s business from it. Mellcraft had no other business premises. The director’s other company had taken a lease of the ground floor commercial unit below the flat.

The landlord gave notice to terminate the tenancy of the flat, stating that it would oppose the grant of a new tenancy under ground G that the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by it.  The landlord wanted to use the flat to grant a tenancy to homeless persons.

Mellcraft applied to the County Court for a new lease and succeeded. The judge found (1) Mellcraft was in occupation of the flat for the purposes of its business at the expiry of the contractual term. Occupation was through its director occupying the flat for the purposes of its business, despite the director also using the flat as his family home (2) that the landlord was not entitled to oppose the grant of a new tenancy under ground G because it did not intend to occupy the flat for the purposes of a business, as it was in fact granting a tenancy to a third party.

The landlord appealed, it failed and the Judge upheld the County Court decision.

Litigation is always the last resort, and the cases above make it clear that there are a number of potential pitfalls for landlords wishing to oppose a lease renewal. Streamlining the Act and reformulating the grounds to oppose renewal may well be on the cards, and may be a welcome development.