The Landlord and Tenant Act 1954 (LTA 1954) entrenches an important principle that a qualifying tenant of a commercial premises is automatically entitled to a new lease, on the same terms once the contractual term has come to an end. That automatic right may be excluded however, but only before the landlord and tenant first enter into a lease. What happens therefore, if that right is not excluded and at the end of the contractual term the landlord opposes a tenant’s application relying on the tenant’s breaches of covenants as specific grounds for opposition?

In the recent case of Harmohinder Singh Gill (as Trustee of the Gillcrest UK Pension Scheme) v Lees News Limited [2023] EWCA Civ 1178 the Court of Appeal considered the three discretionary grounds cited by the landlord when opposing the tenant’s application for a new lease.

What happened in this case?

The tenant served a notice to the landlord for a request of a new business tenancy towards the end of its contractual term.

The landlord opposed the renewal of the lease and served a counter – notice referring to the following grounds for opposition:-

(a) The Tenant had breached its repairing obligations in the lease;

(b) Had been consistently late in paying rent; and

(c) Had committed other substantial breaches of the covenants contained in his lease.

These grounds are discretionary meaning the court may decide to grant a new lease even if these have been established.

At trial, the Judge held that the tenant should be granted a new lease. The Landlord appealed.

The Court of Appeal also agreed and their reasons for doing so were amongst the following:-

1. What happened between the date of the notice and the date of the hearing was plainly relevant – in this case, the tenant had remedied its breach of repairing obligations within that time.
2. The words “ought not to” contained in section 30(1) of the LTA 1954 entitled the courts to take a broad approach as to whether the tenant ought not to be granted a new lease.
3. That the delay in payment of the rent was minor and would not recur; and
4. That the other breaches were too minor to preclude the tenant to right to a new lease.
5. A compartmentalised approach should not be followed but rather consideration should be given to all the grounds relied upon at the same time.

What does this mean for landlords?

If relying on ground (a) where the premises are in disrepair the tenant may have potentially many months before a trial date is listed and in theory ample time to remedy the disrepair. Some comfort is offered to landlords in that the Court of Appeal did say that if the tenant had a lamentable record of performance and only put things right at the last minute, then that is something that the court can legitimately take into account in exercising its discretion whether or not to grant a new lease.

The courts are still under a duty to consider the LTA 1954 fairly for both parties but it is widely accepted that the intention behind certain provisions of the LTA 1954 is to protect business tenants by entitling them to security of tenure (provided they meet certain qualifying conditions). In that way, the LTA 1954 may be an interference with freedom of contract as it could require landlord to enter into a new legal relationship with the tenant when it does not wish to do so.