Opposition of Business Tenancy Renewals – Case Law Update

The Court of Appeal (in the case of Gill v Lees News Limited) has recently provided helpful guidance on the fault grounds upon which a landlord may oppose the renewal of a business tenancy under the Landlord and Tenant Act 1954 (the “Act”), being:

Ground (a) = The premises were in substantial disrepair as a result of the tenant’s breach of its repairing covenant;

Ground (b) = The tenant had persistently delayed in paying rent;

Ground (c) = The tenant had substantially breached its obligations under the tenancy.

In each instance, the Court is required to determine whether the tenant ‘ought not’ be granted a new tenancy in view of the allegations raised by the landlord. 

Whilst the landlord in this case opposed on grounds (a)-(c), the Court’s focus was on ground (a). The Court found in the tenant’s favour even though it had:

• • • previously failed to comply with its repairing obligations;
    • failed to pay rent on time; and
    • breached other covenants from time to time. 

The Court confirmed that the material time to assess the state of repair of the premises is over the entire period of tenancy, instead of a particular point in time. This approach enables the Court to consider all relevant facts and the issues in dispute up until the date of the hearing. This means that the landlord may, in principle, remain opposed to the grant of tenancy on ground (a) where disrepair has been remedied by the date of the hearing. 

The Court also provided guidance on whether the tenant “ought not” be granted a new lease. It must consider all material circumstances and the tenant’s overall conduct (which include the tenant’s past and assumed future conduct). By way of example, the tenant’s overall conduct (including its litigation conduct) could be a reason to refuse a tenancy if it has grotesquely exceeded any reasonable balance – in this case the Court was satisfied that the tenant had taken steps to remedy its breaches and that it would likely comply with its future obligations.

When considering the “ought not” question, the Court adopts a balanced approach that considers the interests of both parties, including the consequences for refusing or granting a new tenancy. 

This case has provided helpful clarification on the timeframe and factors when deciding the “ought not” question. As evidenced in this case, the Court should consider the grounds both individually and collectively, helping to address some prior conflict in the authorities.