Refusing a new business tenancy under the 'fault grounds' in the LTA 1954

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24 March, 2021

Kent v Guest [2021] EWHC 51 (Ch)

The High Court has recently considered what is the correct approach to 'fault grounds' whereby a landlord can oppose a new tenancy under section 30(1)(a) to (c) of the Landlord and Tenant Act 1954 (the "Act").

Background


Mr Kent (the Claimant) owned a racing stables which stood upon approximately 40 acres of land. Mr Guest (the Defendant) was employed at the stables as a racehorse trainer. There was planning permission in place for the land to have a detached house built upon it and it was agreed that the Defendant could move into the property once it was built.

What happened in this case?

The Defendant occupied the stables for his business under a 12 month lease which was contracted out of the protections offered by the Act. A subsequent lease was granted, however this lease was inadvertently not contracted out of the Act. At the expiry of this lease the Claimant sought to end the tenancy but the Defendant refused to vacate the property. The Claimant served a Section 25 notice on the Defendant relying on the fault-based grounds under Sections 30 (1) (a) and (c) of the Act , to oppose the grant of a new tenancy, which the Defendant was entitled to under the Act.

Section 30(1) Landlord and Tenant Act 1954

Section 30(1) states that a landlord may oppose offering a new lease on the following fault based grounds:-

  1. "where under the current tenancy the tenant has any obligations as respects the repair and maintenance of the holding, that the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, being a state resulting from the tenant's failure to comply with the said obligations;
  2. that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due;
  3. that the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the current tenancy, or for any other reason connected with the tenant's use or management of the holding";

Decision

The Court applied a 2 stage test:-

  1. Did the Landlord make out one of the relevant grounds; and
  2. Whether the Tenant "ought not to be" granted a new lease.

Relevant Grounds

The Claimant presented photographs together with expert evidence to demonstrate the untidiness and disrepair of the property and the Defendant presented expert evidence of his own. In disagreement with the Judge at first instance, the appeal Judge found that the breaches were substantial.

The Judge also found a number of other breaches of the lease by the Defendant by way of making alterations to the property without consent, running an unauthorised business from the property and failing to comply with insurance requirements.

Ought a new lease to be granted?

Having made out the relevant grounds, the case turned on the Judge's discretion in deciding whether a new lease ought to be granted. The Defendant had spent significant periods of time away from the property, and the Judge found that further absences would cause the property to deteriorate further. Moreover, there had been so many breaches of the lease, that it would have been unfair to force the Claimant to enter into a new lease with this Defendant.

Forbes Comment

The High Court adopted a pragmatic approach of balancing the requirements under the law and the circumstances as a whole. This is encouraging news for landlords seeking to gain possession for a multitude of individually minor breaches, which when taken as a whole, can be much more troublesome.

The case also highlights the importance of considering the application of the Act to business leases and the need to comply strictly with the requirements of the Act for excluding its security provisions, before completing the lease, where it is not intended that a tenant will have security of tenure. By doing so, the Claimant would have ensured that the Defendant had no grounds to remain in the property after expiry of his lease, without the need for costly Court proceedings.

For more information contact Helen Marsh in our Commercial Property department at Helen Marsh or on 01254 224217 or Laura Hallett Lea in our Dispute Resolution department at Laura Hallett Lea or on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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