In Sainsbury's Supermarkets Limited v Medley Assets Limited [2024] the Court was asked whether the landlord could successfully oppose a renewal lease on redevelopment grounds.
The Claimant, Sainsbury's Supermarket Limited (Sainsbury's), was the tenant of 329-331 Kentish Town Road (the Property), and the Defendant, Medley Assets Limited (Medley), was the landlord. Sainsbury's applied to the Court for a renewal lease under the Landlord and Tenant Act 1954 (the Act) which was opposed by Medley on the grounds that they intended to redevelop the Property.
The Property comprised basement, ground floor, and 4 upper storeys. The Sainsbury's store was located on the ground floor and it was accepted that for a number of years Sainsbury's had not used the basement (and it could not be used for trade as it had asbestos) and only used a small part of the upper storeys for storage.
Medley obtained planning permission to extend the upper storeys and turn them into flats, with an alteration to the rear of the ground floor for an entrance, widening of a staircase and lowering of the basement floor.
As with all redevelopment ground cases, the landlord had to convince the Court that it had a genuine and settled intention to carry out the redevelopment works. In this case, the judge held that Medley had failed 'by a long way' to show a genuine and settled intention in relation to the ground floor works, found that the alleged basement works were a 'contrivance' to get the tenant out and that overall, Medley could not complete the works in the timescale it specified as it could not comply with various regulations. As a result, Medley failed to establish an intention to satisfy ground (f) of the Act, and this was the basis on which the claim failed.
However, the interesting point in this case is the extent of the 'holding' occupied by Sainsbury's. Although their lease extended to the entirety of the Property, Sainsbury's had reduced their operations so that they were only occupying the ground floor, excluding a 26msq area at the rear (having vacated this small area only one week before trial). Sainsbury's argued that the area they were occupying was therefore the 'holding' for the purposes of the Act.
The judge agreed with Sainsbury's, finding that on a proper construction of the Act, the 'holding' is only those parts of the property which are actually occupied by the tenant. Medley argued that section 32(2) allowed the landlord to elect whether a new lease under the Act was to be of the whole or part of the premises and that this should be relevant to the interpretation of 'holding'. However, the judge disagreed, finding that section 32(2) did not come into play when determining whether ground (f) was met, but only when determining the terms of a new lease.
On this basis, the judge held that even if Medley had the relevant intention to carry out the works, they would still fail on ground (f) because the works to the basement and the smaller area of the ground floor fell outside ‘the holding’ and so ground (f) was not engaged.
This decision is significant in that, if a tenant is able to reduce its operations to a smaller section of the premises demised, it may well be able to defeat the landlord's opposition under the Act on redevelopment grounds and obtain a renewal lease, which may well thwart the landlord's plans altogether.
The findings in this case continue the theme of the Courts effectively narrowing a landlord's ability to rely on redevelopment ground (f) to get tenants out of properties, as the previous significant case in this area was S Francis v Cavendish Hotel [2018] in which the Court made it clear that a landlord's intention must be separate to its desire to see get the premises back from the tenant. See our previous note on this case here.
