From Beer Garden to Building Site: A Round on ‘Reasonable Time’ for Ground (f)

Introduction

Under the Landlord and Tenant Act 1954, where a landlord wishes to recover possession for the purpose of redevelopment or undertaking significant construction works, it must (among other criteria) demonstrate a real prospect of commencing those works "on termination of the current tenancy" (which will happen 3 months and 21 days from obtaining judgement).

Over the years, what is meant by "on termination of the current tenancy" has been interpreted in various ways by the courts:

Case	Application of "on termination of the current tenancy"
Reohorn v Barry Corporation [1956]	The bulldozers do not have to be ready the very next day following termination, but instead, the works must begin not at any long delayed time.
Fisher v Taylor’s Furnishing Stores Ltd [1956]	The landlord intended to do the works "at once".
London Hilton Jewellers Ltd v Hilton International Hotels Ltd [1971]	Court of Appeal found that a delay of a "month or so" was permitted. (Albeit this was a Ground (g) case.)
Edwards v Thompson [1990]	Being unable to commence works within a few months meant the "on termination of the current tenancy" criteria wasn’t satisfied.
S Franses Ltd v Cavendish Hotel (London) Ltd [2017]	"…the question is very much fact-sensitive, but it involves consideration not just of how long is reasonably required to initiate the works, but also of what is reasonable in all the circumstances of the case in the context of these underleases."

 

This recent High Court decision has provided some clarity on the application of this test.

 

The Facts

In this case, the landlord was unable to progress its planning permission application until acoustic tests and trial holes had been completed on the premises.

The tenant's lease did not grant the landlord a right of access to carry out these investigations and the tenant had refused the landlord access to undertake the same (which it was entitled to do in the absence of the landlord having an applicable right of access under the lease). As a result, the landlord would require between 10 and 14 months after obtaining possession to complete the other steps necessary and secure planning permission before commencing the proposed works. Therefore, and rather unusually, as at the day before the trial the planning application had not yet been submitted.

 

The Decision

At first instance, the judge found in favour of the landlord on the timing point, although the court ultimately ruled in favour of the tenant overall.

On appeal to the High Court, however, the judge found in favour of the tenant on this issue. In reaching this conclusion, the High Court held that the correct test was that set out in Reohorn: namely, it was not a question of whether the 10 – 14 month delay could be justified, but rather whether this delay meant that the landlord did not intend to carry out the works "on termination of the current tenancy" (or within a reasonable time thereafter). On appeal, the 10-14 months was held to not be "on termination of the current tenancy".

Interestingly, the High Court judge observed that: "the fact that the Landlord was unable to get further ahead with the planning process because the Tenant would not permit entry onto the Premises to carry out intrusive investigations is neither here nor there. Those were the consequences of the terms of the parties’ bargain."

In balancing the interests of landlord redevelopment against tenant security, the Judge noted that the landlord could ask the County Court (which would determine the terms of any new lease) to include: (i) a landlord break right; and (ii) a clause permitting greater access in favour of the landlord for the purpose of undertaking the outstanding tests.

 

Key Takeaways

This case acts as a reminder for landlords to:

• ensure that their rights of access for undertaking works are sufficient and broad enough to achieve their long term aims within the terms of the lease; and
• be progressing the necessary planning permissions swiftly so that at the point of trial the landlord can evidence that it will commence with the works on termination of the current tenancy.