A landlord may struggle to successfully object to his tenant’s statutory lease renewal based on his intention to occupy where he is likely to sell the premises.
Patel v Keles concerned the important issue of the basis on which landlords can oppose a business tenant’s application under the Landlord and Tenant Act 1954 (“Act”) for a renewal of its tenancy.
A landlord can object to a renewal in certain statutory circumstances, which in this case was that the landlord intends to occupy the tenant’s premises to carry on his own business. The Court of Appeal considered whether a landlord had shown the requisite intention where he claimed he intended to occupy, but the court found that the landlord was likely to sell the premises in due course.
The Keles were the landlords of premises of which the Patels were their tenants. They occupied the premises as a newsagents and their lease expired in 2007, but continued by virtue of the Act. The Patels applied for the grant of a new lease, which the Keles opposed on the ground that they intended to occupy the Patels’ premises for the purposes of their business. To successfully oppose on that ground, the Keles had to show, firstly, that there was a realistic prospect, objectively judged, that Mr Keles would be able to give practical effect to his intention to occupy, and, secondly, that he had a subjective intention to use the premises for his business. The necessary intention is not satisfied if it is shown that the landlord intends to sell within five years.
At first instance, the county court was worried about Keles’ intention. The judge was concerned about the temporary nature of an undertaking given by Keles during the proceedings not to use the premises for two years for any purpose other than as his newsagents’ business. Where there was such a limited undertaking and against the background of Keles, who was over 60, having sold other businesses, the judge considered that there was a real doubt that he had a substantial and genuine intention of running a business for the foreseeable future at the premises. The business was very likely not to survive the two years offered in the undertaking. The judge concluded that he was far from satisfied that Keles had the real intention required by the Act.
Keles appealed to the Court of Appeal. In view of the serious implications for tenants of not having their tenancy renewed, the courts have set a high hurdle for establishing the necessary intention to occupy. The landlord must prove that he has a genuine, settled and fixed intention to occupy for the purposes of his business, which must go beyond mere contemplation. Whether there is such intention is a question of fact.
The Court stated that it can properly conclude that a landlord has not shown the requisite intention to occupy where it has found that a sale is merely likely, as opposed to intended. Statute does not require that the landlord should intend to occupy the premises for any particular length of time, but his intended occupation must not be fleeting or illusory. There must be some substance in the intended occupation and the occupation must, therefore, be more than short term. What is short term depends on the facts of the case.
If the landlord has a settled intention to sell the premises within five years, he will be treated as not having the requisite intention to occupy. If the judge, as in this case, finds that the landlord is likely (even “highly likely”) to sell, that likelihood is a factor which the court must take into account in deciding whether he has discharged the burden of proving he has a genuine intention to occupy the premises for the purposes of his business.
The Court held that the county court was entitled to conclude, based on the evidence, that Keles had not shown the necessary intention. The Court dismissed Keles’ appeal and their objection to the grant of the new tenancy to the Patels.