Don’t misrepresent your intention to terminate a commercial lease. 

This case is one of the few decisions on compensation for misrepresentation under Section 37A of the Landlord and Tenant Act 1954, as the landlord obtained an order terminating the lease by misrepresentation. This judgement makes it clear that a tenant may be able to claim compensation if the landlord terminates an existing tenancy and misrepresents their intentions to occupy the premises for their own business purposes.  

Background:

Until 2019, a branch of McDonald’s was run from part of the ground floor and basement of the building under an underlease granted in December 1997 for a term of 20 years which benefited from protection under the Landlord and Tenant Act 1954 (LTA 1954). 

At the end of the contractual term, the landlord served a notice pursuit to Section 25 indicating that it would oppose the grant of any new tenancy on the “own occupation” ground in Section 30(1)(g) and made an application to the Court, pursuant to Section 29(2), for an order for the termination of the lease. During those proceedings, the landlord brought two witnesses who attested that the landlord had a ‘firm and settled intention’ of opening up a Japanese restaurant (Zen Bento) on the premises and a reasonable prospect of achieving its intention within a reasonable period following termination of the lease. However, Zen Bento never opened and in its place, a different restaurant and bakery were opened at the premises. 

McDonald’s vacated the premises in March 2019 but the premises were still vacant in November 2019 and January 2020. McDonald’s sued for damages under Section 37A LTA 1954.

Opposing renewal on Section 30 grounds: 

A tenant that occupies premises for the purposes of its business will, subject to certain exceptions, have “security of tenure” under the LTA 1954 which includes the right to a new lease.  A landlord can, however, oppose the granting of a new lease. They can do so on limited grounds contained in Section 30(1). One of the statutory grounds is where the landlord intends to occupy the premises for the purpose of their own business (ground (g)).  For this ground to succeed, the landlord needs to show that they have a firm and settled intention to occupy the premises for the purpose of its business within a reasonable time of the termination of the existing tenancy. 

This case centred around the evidence which had been given by a landlord during the preliminary trial. Indeed, the restaurants which had in fact opened were different from the one the landlord had told the County Court would appear. It became clear that, in actual fact, the landlord had not decided what business to operate from the premises and therefore misrepresented their intentions. The Termination Order was, therefore, obtained by misrepresentation which allows the claimant to claim compensation under Section 37A. Mr. Justice Edwin Johnson noted that, while the landlord did want to run a restaurant from the premises, the County Court was induced to refuse to grant a new tenancy on misrepresentation. 

The Court, however, dismissed the claim of deceit. Mr. Justice Edwin Johnson was not satisfied that the tort of deceit was sufficiently flexible to accommodate the present situation. 

Implications:

This judgement demonstrates the importance of the landlord following through on the proposals which form the basis of their refusal under Section 30(1)(g). This judgement also makes it clear that statements of truth are crucial and, if found not to match, can lead to onerous consequences.  

This decision does not mean that landlords need to have a strict idea and strong proposal before opposing the renewal. In this case, the issue revolved around the landlord’s statements which did not reflect the landlord’s true intention. It is also a reminder to avoid sending e-mails immediately following judgement which contradict the evidence just given.