Youssefi v Mussellwhite

For opposition to renewal of a protected business tenancy, the statutory “ought not” inquiry is discretionary but must remain tied to the ground relied on. Ground (a) focuses on the state of repair caused by breach of repair or maintenance obligations; ground (b) on persistent delay in paying rent; and ground (c) permits a broader assessment of substantial breaches and other reasons connected with use or management. The court asks whether continuing with the tenant would prejudice the landlord’s proper interests or be unfair. Proof of reduced rent or reversion value is unnecessary. A user covenant expressed as an obligation to use premises for specified purposes may be positive, even without an express keep-open covenant.

The appellant held a 15-year lease of premises described as a dwelling house, shop and premises. After the contractual term expired, the tenancy continued under Part II of the Landlord and Tenant Act 1954. The appellant sought a new tenancy. The respondent opposed renewal under section 30(1)(a), (b) and (c).

The County Court found Ground A proved in relation to creeper growth and decoration, and Ground C proved in relation to access and the user covenant. Ground B was not made out. The tenancy was terminated without a new tenancy under section 29(4). The appeal concerned the interpretation and application of the particular-breaches requirement and the “ought not” test.

Appeal allowed in part. The appeal succeeded on Ground A but failed on the access and user aspects of Ground C. The respondent’s notice was dismissed. The order refusing a new tenancy was therefore upheld under section 29(4) of the Landlord and Tenant Act 1954.

1. The “ought not” inquiry is discretionary but is confined by the statutory ground. Under section 30(1)(a), the court focuses on the state of repair resulting from breach of repair or maintenance obligations. Under section 30(1)(b), it focuses on persistent delay in paying rent due. Under section 30(1)(c), the inquiry is wider and may concern substantial breaches or any other reason connected with use or management. The court looks forward to the hypothetical new term and asks whether continuation would prejudice the landlord’s proper interests or be unfair. Quantifiable loss to rental income or the reversion is unnecessary. This approach was informed by John Kay Ltd v Kay [1952] 2 QB 258 and Lyons v Central Commercial Properties (London) Ltd [1958] 1 WLR 869.
2. Ground A was not established. The implied tenant-like obligation did not make the appellant responsible for removing creeper from the building’s structure, particularly where the landlord had an express covenant concerning exterior maintenance and repairs. Even if the work had been the appellant’s responsibility, the estimated cost of £350 did not amount to substantial neglect. The decoration and creeper could have been aggregated, but they did not justify refusing renewal.
3. The repeated obstruction of reasonable inspections was a substantial breach of the access covenant. The landlord’s motive to sell and the absence of proved loss were irrelevant. The trial judge was entitled to conclude that continuation with the appellant would be unfair and prejudicial. The access breach alone was sufficient, although it would have been preferable to assess all established Ground C breaches together.
4. The user covenant imposed a positive obligation to use the premises for a specified retail purpose, not merely a negative prohibition on other use. The Court of Appeal decision in Montross Associated Investments SA v Moussaieff [1992] 1 EGLR 55 CA supported that analysis; the first-instance decision at [1990] 2 EGLR 61 was not persuasive. The unusual combination of vestigial activity, failure to seek consent and absence of any intention to operate a compliant business justified treating the breach as substantial and refusing renewal.
5. It was unnecessary to determine the respondent’s additional Ground B and use-or-management arguments, but the court indicated that it would have upheld the trial judge’s conclusions on them.

1. Court of Appeal (Civil Division) — Allowed the appeal on Ground A, dismissed it on the remaining grounds, dismissed the respondent’s notice, and upheld refusal of a new tenancy under section 29(4) of the Landlord and Tenant Act 1954.
2. Winchester County Court sitting at Southampton County Court — By judgment dated 28 August 2012, Mr Recorder Norman terminated the tenancy without granting a new tenancy, finding Ground A and Ground C established but Ground B not made out.