The Royal Borough of Kensington and Chelsea v Mellcraft Limited

For the purposes of the Landlord and Tenant Act 1954, residential premises may qualify as business premises where business use is a significant purpose of occupation and is not merely incidental to residential use. A company may occupy premises through its director, manager, servant or agent where the business conducted there is the company’s own business.

For opposition to renewal under section 30(1)(g), a landlord must show a firm intention to occupy the holding for its business and a reasonable prospect of fulfilling that intention. A landlord granting tenants exclusive possession will ordinarily cease to occupy the premises, even where the lettings are temporary, non-secure and made in discharge of statutory housing duties. The appeal court should not interfere with factual evaluations absent a critical finding unsupported by evidence or a conclusion no reasonable judge could reach.

Mellcraft Limited occupied a flat leased from the Royal Borough of Kensington and Chelsea. Following service of a section 25 notice, Mellcraft claimed a new business tenancy under Part II of the Landlord and Tenant Act 1954.

The County Court determined that Mellcraft occupied the flat for business purposes, notwithstanding its residential use, and that the Borough had not established the ground of opposition in section 30(1)(g). The Borough appealed, challenging both determinations on grounds of law, evidence and the proper characterisation of temporary accommodation provided to homeless persons.

The central issues were whether the company’s business use was sufficient to engage section 23(1), and whether intended lettings under the Borough’s statutory homelessness functions would amount to occupation by the Borough.

1. Appeal dismissed. The County Court’s determinations on both preliminary issues were upheld.
2. Under section 23(1) of the Landlord and Tenant Act 1954, the relevant question was whether business use was a significant purpose of occupation, rather than merely incidental to residential use. The Judge was entitled to find that Mellcraft conducted its lease-management business from the flat and that this business use was sufficient. The reasoning in Cheryl Investments Ltd v Saldhana was correctly applied. The company could act and occupy through its sole director, who conducted its business from the premises. The reference to Pegler v Craven was therefore correct: a company may occupy through an officer, servant or agent.
3. The appellate court could not substitute its own evaluation of the evidence. The principles in Fage UK Ltd v Chobani UK Ltd and Haringey LBC v Ahmed applied. There was no critical finding unsupported by evidence and no conclusion which no reasonable judge could have reached. The absence of extensive corroboration did not establish an error of law.
4. For section 30(1)(g), the Borough bore the burden of showing a firm and settled subjective intention to occupy the flat for its business, together with a reasonable prospect of fulfilling that intention. The intended use of the flat as temporary accommodation was a business activity, but the evidence established that the Borough intended to grant tenancies rather than licences.
5. Applying Graysim Holdings Ltd v P&O Property Holdings Ltd, the grant of a tenancy ordinarily gives the tenant sufficient exclusive possession to be the occupier, leaving the landlord without occupation. The temporary, short-term and non-secure nature of the proposed tenancies did not alter that conclusion. No tenancy terms or other evidence demonstrated exceptional retained control. The Borough therefore failed to establish paragraph (g).

• High Court, Chancery Appeals (ChD): Appeal from the order of His Honour Judge Monty KC made on 11 December 2020 dismissed. The determinations that Mellcraft occupied the flat for business purposes and that the Borough had not satisfied section 30(1)(g) were upheld.
• County Court at Central London: Preliminary issues determined in favour of Mellcraft, resulting in entitlement to a new lease under Part II of the Landlord and Tenant Act 1954.