In the recent Court of Appeal decision in Gill (as trustees of the Gillcrest UK pension Scheme) v Lees News Ltd, a commercial tenant applied for a new tenancy, which the landlord opposed. The Court considered the reasons the landlord listed for opposing the business tenancy renewal. The Court has further given some clarity to commercial landlords and tenants about when a landlord’s opposition to a tenancy renewal may be successful.
In August 2018, the commercial tenant requested a tenancy renewal. The landlord subsequently refused the request for a new lease. The landlord explained that the tenant “ought not” to be given a new tenancy because the tenant had failed to comply with various obligations in the tenancy. These included:
- failing to repair the premises resulting in disrepair;
- persistently delaying in paying rent; and
- other serious breaches of the tenancy agreement.
| High Court’s Decision
The tenant applied to the Court to challenge the landlord’s refusal. The Court found in the tenant’s favour on the basis that;
- the tenant had remedied the disrepair by the date of the hearing; and
- whilst the tenant had persistently delayed in paying rent, this breach and other breaches were minor in this instance.
Therefore, the landlord had not shown that the tenant “ought not” to be granted a new tenancy.
The landlord appealed the Court’s decision.
| Court of Appeal’s Decision
The Court of Appeal looked at the relevant date for assessing the tenant’s failure to repair the premises. It decided that it was not limited just to the date on which the landlord served the notice on the tenant refusing the tenancy renewal and the date of the hearing.
Further, where the landlord relies on multiple breaches of the tenant’s obligations, the court should consider these breaches as a whole when deciding whether the tenant “ought not” to be granted a new tenancy.
Finally, the overall question for opposing new business tenancies is whether it is fair for a landlord to be forced into entering a new tenancy. However, a judge can consider matters relating to the tenant. For example, potential hardship to the tenant if the court refuses the new tenancy.
The Court of Appeal found in the tenant’s favour and decided that the landlord should grant a new lease.
| What does this mean for landlords opposing business tenancy renewals?
This case potentially provides a shift in the Court’s approach to issues relating to commercial tenancies in a way which may be seen as favourable to tenants. It essentially says that a breach does not automatically mean a tenancy can be refused.
It is important for landlords to not assume that, whilst the tenant has breached the tenancy agreement on the date of a refusal to renew, that the tenant will not be granted tenancy.
If you are a landlord or tenant of a commercial premises, and would like more information about contested business tenancy renewals, call us on 0800 988 7756.