Come the end of a business tenancy, Part 2 of the Landlord and Tenant Act 1954 allows (unless the parties have opted out of the provisions of the Act) the business tenant the right to remain in the premises and claim the grant of a new lease. The landlord is able to oppose the tenant's claim to a new lease in only limited circumstances. One ground of opposition is commonly known as the "redevelopment" ground. Under section 30(1)(f) of the 1954 Act the landlord can oppose lease renewal if:
"...........on termination of the current tenancy the landlord intends to demolish or reconstruct the premises.........or a substantial part of those premises or to carry out substantial work of construction .........and that he could not reasonably do so without obtaining possession (of the premises)"
The law recognises that where the landlord intends to redevelop, and therefore needs possession of the premises, this is of no fault on the part of the tenant. As such, the tenant is entitled to an award of compensation for disturbance to his business (and this is generally calculated at once or twice the rateable value of the premises, depending on how long the business has operated from the premises).
Section 37A of the 1954 Act goes further in terms of the compensation award and covers the circumstances where a landlord has misrepresented or concealed from the tenant material facts concerning his intention and which has resulted in the tenant leaving the premises. In such circumstances the court has the power to make an award in favour of the tenant in "such sum as appears sufficient as compensation for damage or loss sustained by the tenant....." This could be quite severe for the landlord and can extend to a claim for relocation costs and loss of business (on top of the regular compensation payment).
The 2009 case of Inclusive Technology -v- Williamson shows just how careful a landlord has to be in his approach to redevelopment and disclosing his intentions. In that case the landlord served notice on the tenant terminating the existing lease and opposing the grant of a new one on the basis that the landlord wanted to redevelop the premises. The notice was sent with a covering letter in which the landlord set out an explanation of his plans and why he would need possession of the premises. The tenant subsequently moved out and started up elsewhere. In the meantime, the landlord changed his mind, put his redevelopment plans on hold and decided to remarket the premises. When the (ex) tenant got wind of this he went to court. The Court of Appeal ruled that the representations made by the landlord in his covering letter were "continuing representations" which became misrepresentations when he changed his mind and so section 37A applied.
The ruling leaves landlords in similar circumstances with something of a dilemma, what should they say (if anything) to a tenant about plans for redevelopment? The Court of appeal acknowledged that citing a ground of opposition in the notice alone was not enough to amount to a representation. So landlords may ask themselves, why elaborate in a covering letter? The case certainly illustrates that where a landlord has communicated his intentions and those intentions change, the safest option is to inform the tenant. Indeed, the Court of Appeal acknowledged that the purpose of section 37A was to encourage "fair dealing" between the parties.
The 1954 Act is rocky road to travel at the best of times, and not just on the redevelopment front! However, with a degree of planning of approach and the right navigation it should not lead you into the wilderness!