Broadway Investments Hackney Ltd v Grant

Where a tenancy includes premises occupied for business purposes, s 23(1) of the Landlord and Tenant Act 1954 applies if the business use is a significant purpose of the occupation, not merely incidental or casual. The court considers the actual occupation and the terms of the tenancy. A tenancy may therefore be a business tenancy even though part of the premises is the tenant’s home. That conclusion is especially clear where the lease permits business use in a defined part and positively requires the tenant to operate a business there. Once the tenant begins that business use, Part II protection applies.

A local authority granted the defendant a ten-year lease of premises comprising a basement, shop and upper residential accommodation. The lease required the lower premises to be used as a shop and the defendant began trading there in January 2000. The freehold was later acquired by the claimant, which sought forfeiture, possession and rent arrears.

The District Judge treated the lease as a business tenancy and made a possession order. On appeal, Judge Cotran treated the residential element as potentially attracting protection under the Housing Act 1988, set aside the order and substituted a suspended possession order. The claimant appealed. The central issue was whether Part II of the Landlord and Tenant Act 1954 applied to the tenancy.

1. Appeal allowed. The District Judge had correctly approached the tenancy as a business tenancy. The order on appeal was set aside. Possession was ordered in 28 days unless the defendant paid the rent arrears then due, pursuant to s 138(3) of the County Courts Act 1984, together with an order for payment of that sum.
2. s 23(1) of the Landlord and Tenant Act 1954 raises a factual question: whether the tenant occupies premises comprised in the tenancy for the purposes of a business carried on by him, or for those and other purposes. The inquiry is not confined to the tenant’s subjective purpose when the lease was granted.
3. The distinction explained in Cheryl Investments v Saldanha was applied. Business activity that is merely incidental, casual or fortuitous to residential occupation will not suffice. But where business use is a significant purpose of occupation, the section applies. Here the lease restricted the lower premises to business use, required the tenant to keep the shop open during usual business hours, and the defendant in fact traded there. The business use was therefore not incidental, and Part II applied from the commencement of trading.
4. It was unnecessary to decide the alternative argument concerning ground 8 in Schedule 2 to the Housing Act 1988. The court nevertheless observed that, had an assured tenancy been reasonably arguable, remittal could have been proper. A landlord seeking possession under an assured tenancy must ordinarily serve a notice under s 8, identify the grounds and comply with the statutory time limits. Ground 8 is mandatory only if the arrears condition exists at both notice and hearing; waiver of notice under s 8(5) prevents reliance on that ground.
5. The court criticised Judge Cotran’s handling of the hearings, which gave an appearance of bias and prejudgment, but held that it was unnecessary to decide the appeal on that basis.

1. Court of Appeal (Civil Division) — [2006] EWCA Civ 1709: appeal allowed; the order made by Judge Cotran was set aside and the District Judge’s possession order was restored in substituted terms.
2. Shoreditch County Court, His Honour Judge Cotran: appeal allowed against the District Judge; the absolute possession order was set aside and a suspended possession order substituted.
3. Shoreditch County Court, District Judge Manners: possession order made after treating the tenancy as a business tenancy, with orders for arrears and costs.