Spirit Pub Co (Managed) London Ltd v Pridewell Properties (London) Ltd
The Court has given judgment Spirit Pub Co (Managed) London Ltd v Pridewell Properties (London) Ltd, in which Nat Duckworth appeared for the successful tenant, instructed by Azaria Stanley at Roythornes LLP. The judgment can be found here.
The Landlord sought to remove the Tenant from premises comprising an established pub with residential upper parts under Ground (f) to pave the way for a mixed commercial and residential redevelopment. The Tenant took various points against the Landlord’s Ground (f) case. The Tenant succeeded on just one of them – the Landlord had not established a real prospect of securing funding for the works – but that was enough to derail the Landlord’s Ground (f) opposition.
Like all Ground (f) cases, the case turns on its facts. But it raised a few points that may be of interest to practitioners generally.
The reasonable period of additional time for commencement of Ground (f) works
To make out Ground (f) a landlord must show that it intends (both subjectively and objective) to commence the works “on the termination of the current tenancy”. The case law establishes that that requirement will be satisfied as long as the works are started within a reasonably short period of time after the existing tenancy ends under s.64 and that if the additional period of time does not exceed 3 months, that will almost invariably be within the statutory tolerance. On the first appeal in S Franses Ltd v Cavendish Hotel (London) Ltd, Jay J allowed an appeal against the first instance judge’s finding that a delay of 12 months was within the statutory tolerance. The first instance judge had applied the wrong test and the matter was remitted to him, but Jay J commented that, in contrast to 3 months, 12 months was unusual and there was a heavy burden on the landlord to justify such a delay.
In Spirit Pub, HHJ Hellman found that the Landlord’s works might not commence until 14 months after the current tenancy terminated under s.64. That is a materially longer period than even the 12 months that was the subject of the appeal in Franses. The Judge held that, to date, the landlord had “done everything that can reasonably be expected of it to progress the Development” (§124) and that there was a “reasonable explanation” for the landlord having not yet completed the remaining steps in the process (§127). That being so, it did not matter that the works might not be commenced for another 14 months after vacant possession was achieved.
Relatedly, part of the Judge’s reasons for entertaining such a lengthy period of additional time was that the Tenant had declined to volunteer additional rights of access to enable the landlord to dig trial holes and do other things it needed to do before launching its planning application. The Judge said that, as a matter of contract, the Tenant had been perfectly entitled to say ‘no’, but that the Landlord could not therefore “fairly be criticised for not having progressed the Development further” (§126). The Tenant’s refusal to cooperate by offering up extra-contractual access rights was a central plank of the Judge’s reasoning for entertaining a 14-month delay in the commencement of the works.
Ground (f) akin to summary judgment
The Judge said that the Ground (f) exercise was akin to the one undertaken by the Court when determining an application for summary judgment and that, accordingly, he should take into account, not only the evidence available at the Ground (f) trial, but also the documents which might be obtained at a later date to support the landlord’s planning application (in this case an acoustics report). The Judge went on to consider whether there was a real prospect that the contents of that report, when later obtained, would be favourable to the landlord and justify the grant of planning permission (§87). The legitimacy of that approach may yet arise for consideration in another case.
No extension of the Franses ‘conditionality’ principle
The Landlord company had formally resolved to undertake this scheme of works, before a planning application had been launched and before any reliable offer of funding had been obtained. In course of cross-examination, the landlord’s witness accepted that the timing of that resolution had been brought forward because the Tenant’s lease renewal proceedings were on foot and the Landlord was conscious of the need to make out Ground (f). Absent the exigencies of the renewal proceedings, the Landlord would have waited until it had a better understanding of the feasibility of the works before taking its decision. The landlord’s witness also accepted that, absent the need to make out Ground (f), the Landlord would have progressed matters at a gentler pace and the works themselves would have been commenced at a later date.
In light of that evidence, the Tenant argued that both the Landlord’s formal decision to carry out the works and the commencement date for its works had been artificially accelerated for reasons solely connected with the need to remove the Tenant under Ground (f). Although the ‘conditionality’ principle expounded by the Supreme Court in Franses related to the scope of the works, the Tenant submitted that the same logic should apply to the timing of the decision to carry out the works and the timing of their commencement. The Tenant relied on the decision in London Kendal Street No 3 v Daejan Investments Ltd [2019] EGLR 43 in which HHJ Saunders had accepted that if works would naturally have been commenced at a later date, but were accelerated to an earlier date to remove an unwanted tenant under Ground (f), the works would also be ‘conditional’ in the Franses sense.
However, HHJ Hellman was not prepared to extend the principle in that way. He held that the principle which is derived from Franses was that “a landlord will not have the requisite intent if [it] would not intend to do the same works if the tenant left voluntarily” and that it was therefore “nothing to the point” that the decision to carry them out was accelerated (§70). Implicitly, the Judge held that accelerating the timing of the commencement of the works was likewise nothing to the point.
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