Background

The tenant requested a new lease of its shop, which had security of tenure under the Landlord and Tenant Act 1954 (the 1954 Act).

The landlord responded with a notice stating that it opposed the grant of a new lease on the “tenant fault” grounds (a) – (c) in section 30(1) of the 1954 Act – namely the tenant’s breach of its repair and other obligations under the lease and persistent delay in paying rent.

The landlord argued that these breaches meant the tenant “ought not” to be granted a new lease (to use the statutory terminology of section 30(1)).

Key date for establishing breach of repair obligations

The tenant argued that the purpose of the landlord’s notice was merely to let the tenant know what it would be arguing at the date of the hearing – which was the key date for establishing whether the tenant was in breach of its obligations. As the tenant had carried out works bringing the property up to scratch by the date of the hearing, it argued that the earlier disrepair was no longer relevant.

The court, however, agreed with the landlord’s approach that assessing the breach was not tied to a “single snapshot” on the date of the hearing, and in deciding whether or not a new lease could be granted, the court could look at the tenant’s compliance with its obligations throughout the term of the lease.

The fact that the tenant had carried out repair works between the date of the notice and the hearing was relevant, and given considerable (perhaps even decisive) weight in this case. However, the Court made it clear that carrying out the repair works would not necessarily entitle a tenant to a new lease; if the tenant has a “lamentable record of performance” but puts things right at the last minute, the Court could take that into account in refusing to grant a new lease

Court’s discretion to refuse to grant a new lease

The Court then considered how to exercise its discretion on whether a new lease ought not to be granted and, crucially, emphasised that it was not limited to considering each ground in isolation, and could look at them cumulatively.

The question of whether a lease ought not to be granted depended on whether it was fair to the landlord to compel him to re-enter legal relations with the tenant, given its past behaviour. In making that judgment, the court can also consider the consequences for the tenant of no new lease being granted.

In this case, the court considered the fact that the landlord had been a “hands off” commercial landlord during the term of the lease, and had not enforced the lease terms throughout the lease, but who nonetheless required strict compliance with lease terms. On the flip slide, the tenant would lose its livelihood if it was not granted a new lease of the shop. The Court concluded that the tenant had learned its lesson, and the threat to its livelihood would be a strong incentive on the tenant to comply with its obligations and pay the rent on time in the future and so granted a new lease.

What does this mean for landlords and tenants?

While a new lease was granted in this case, it was very much based on the court’s confidence that the tenant would comply with its obligations in the future.

This means that tenants cannot repeatedly breach the terms of the lease and expect a new lease, merely by paying arrears or making good on disrepair or other breaches just before a lease renewal hearing.

The judgement should also give landlords some comfort that, where there are multiple grounds of opposition – such as disrepair, non-payment of rent, and breach of other lease obligations – the court will consider them all in the round in deciding whether to exercise its discretion not to order the grant of a new lease.