Pridewell Properties (London) Limited v Spirit Pub Company (Managed) Limited

To establish opposition to a new business tenancy on redevelopment grounds, a landlord must show a real prospect of obtaining the necessary finance, permissions and consents, and of carrying out the works on termination of the current tenancy. The test is not satisfied merely because preparatory steps could reasonably take many months. A short period for mobilisation and preliminary work may be allowed, but the landlord must intend to set about the works within a reasonably short time after termination. Where planning permission depends on surveys and consultations that are expected to delay the works by 10–14 months, the statutory requirement is not met.

The landlord appealed from a decision of His Honour Judge Hellman in the Mayor’s and City of London Court. The judge held that the landlord had not established ground (f) under section 30(1) of the Landlord and Tenant Act 1954, so the tenant was entitled to a new business tenancy.

The proposed redevelopment required planning permission, funding and resolution of an unidentified restrictive covenant. The trial judge found a real prospect of planning permission and funding in principle, but held that the landlord had not proved that its directors could provide guarantees of substantial value. He also considered that works beginning 10–14 months after possession would begin within a reasonable time. The appeal challenged the funding finding. The tenant’s Respondent’s Notice raised further grounds, including timing and planning permission.

1. Appeal dismissed. The landlord’s argument that the funding issue was irrelevant failed. The trial judgment had to be read as a whole. Funding involved the value of the initial security, the loan required, the loan-to-value ratio, lender conditions, the gross development value and guarantees. The trial judge was entitled to find that guarantees of substantial value were required and that the absence of evidence about the directors’ assets meant that a real prospect of obtaining funding had not been proved.
2. The court would in any event have upheld the decision on the timing ground. Under section 30(1)(f) of the Landlord and Tenant Act 1954, the landlord must intend, and have a real prospect of being able, to carry out the works on termination of the current tenancy. The statutory expression permits a modest period for recovering and securing the premises, mobilising contractors and taking preliminary steps. It does not permit a substantial delay while the landlord undertakes steps that must be completed before it can set about the works.
3. The phrase “within a reasonable time” is only a paraphrase of the statutory test. The question is not whether the estimated delay is reasonable or justified in all the circumstances. It is whether the expected delay is so long that the landlord cannot properly be said to intend to carry out the works on termination.
4. The expected 10–14 month delay arose because surveys, intrusive investigations and pre-application planning work could not be undertaken before possession. That was a substantial delay. The landlord therefore had not proved the necessary intention, regardless of the reason for its lack of progress.
5. The planning and restrictive-covenant grounds were not necessary to dispose of the appeal. The court considered that the trial judge was entitled to find a real prospect of overcoming the covenant and obtaining insurance, but would have remitted the planning issue if it had been decisive. The landlord could seek a short new tenancy, access rights or a redevelopment break option.

• Chancery Appeals List (ChD): Appeal from the decision of His Honour Judge Hellman in the Mayor’s and City of London Court. The appeal was dismissed.