Recent High Court case provides useful guidance on the “intention to redevelop” test under Section 30(1)(f) of the Landlord and Tenant Act 1954 in the context of how the landlord intends to fund the development.
Introduction
In the recent case of Man Ltd v Back Inn Time Diner Ltd [2023] EWHC363 (Ch), Sir Anthony Mann gave some useful guidance on the proper interpretation and application of the “intention to redevelop” test for the purposes of Section 30(1)(f) of the Landlord and Tenant Act 1954 (Act) in the context of funding. Amongst other things, the High Court concluded that:
- The “realistic prospect” test applies to the Landlord’s ability to fund in a similar way that it does to their ability to obtain planning permission; and
- The Landlord’s ownership of other properties may be relevant when establishing the redevelopment ground.
The decision provides not only some useful guidance for trial preparation (particularly from the Landlord’s perspective), but also serves as a reminder to focus on the correct legal test to successfully make out the ground.
Facts
Man Ltd (Landlord) demised the premises (Premises) to the Bank In Time Diner Ltd (Tenant) pursuant to a lease (Lease) which expired by effluxion of time at the end of May 2018. The Tenant, who operated an American-style diner out of the Premises, requested a new tenancy from the Landlord by serving notice (Notice) under Section 26 of the Act.
The Landlord served a counter-notice (CN) on the Tenant to oppose their request, citing the redevelopment ground set out within Section 30(1)(f) of the Act. That ground of opposition states that a landlord may oppose where:
“…on the termination of the current tenancy 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.”
The Landlord had intended to redevelop the Premises into a multi-story mixed-use development. However, as of the date of the hearing, planning permission had been refused but was subject to an appeal by the Landlord. At first instance, HHJ Duddridge found against the Landlord on the basis that there was no real prospect of obtaining planning permission and the Landlord appeared to lack the ability to fund any development. The Landlord appealed.
Decision on Appeal
On appeal, Sir Anthony Mann dismissed the appeal, concluding that:
1. Whilst there was some limited evidence before HHJ Duddridge as to the ability to fund, bank statements providing concrete evidence of this were not disclosed until the start of the trial. In all of the circumstances of the case, HHJ Duddridge considered that the requirements for relief from sanctions under Denton v T H White [2014] EWCA Civ 906 were not made out to allow these statements to be admitted as evidence out of time. Therefore, this evidence could not be considered at the hearing;
2. HHJ Duddridge had made no error in failing to refer in his judgment to documentary evidence said to corroborate the Landlord’s evidence that he had third-party properties that could act as security for funding. On this point, whilst there was some evidence of ownership of another property, it had not been adequately identified in the Landlord’s witness evidence and no connection had been made between that and the ability to secure funding. Indeed, the comment that HHJ Duddridge had made that any link between that property and security was “slim if it existed at all” was well founded;
3. As to the correct legal test for funding, the objective test is usually the same as that applied to the likelihood of obtaining planning permission, in that there is a “real” (as opposed to “fanciful”) chance of the planning permission being grated (see Cadogan v McCarthy & Stone [2000] 2 EGLR 45). Sir Anthony Mann cited the case of DAF Motoring Centre v Hutfield & Wheeler [1982] 2 EGLR 59 in support of this proposition;
4. As to the Landlord’s allegation that HHJ Duddridge had set the threshold “too high” (by repeatedly referring in his judgment to the Landlord having to prove that it “would be able to fund the development”), whilst Sir Anthony Mann agreed that the wording used by HHJ Duddridge could justify the inference that he had applied a higher threshold than required, then the judgment was read as a whole (including earlier references to the correct test) it was clear that HHJ Duddridge had the correct test in mind.
The appeal was therefore dismissed.
Practical implications
Apart from the more obvious reminder to ensure that contemporaneous evidence of funding is disclosed as soon as practically possible, the above decision is an important reminder of the need to focus on the correct legal test when preparing for trial in contested lease renewal cases. The correct test is whether there is a “realistic prospect” of implementing the intention and not whether the landlord “will be able” to do so. The latter threshold is set too high.
As to landlords who wish to rely upon other properties to support their bid for redevelopment, this decision demonstrates that merely identifying other properties (in the landlord’s ownership) is unlikely to suffice. Instead, it is likely that the landlord will need to demonstrate a connection between that property or properties and the landlord’s ability to obtain funding.
How can Nelsons help
For more information concerning the subjects discussed in this article, please contact a member of our expert Dispute Resolution team in Derby, Leicester, or Nottingham on 0800 024 1976 or contact us via our online form.
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