Required for non-agricultural use”: has the old chestnut cracked?

On 5 December 2018 the Supreme Court handed down its opinion in S Franses Ltd v Cavendish Hotel (London) Ltd Supreme Court [2018] UKSC 62, a case on the recovery of vacant possession (or, more accurately, opposing the grant of a new tenancy) under the Landlord and Tenant Act 1954 (the ’54 Act). But does this impact upon the problems encountered by many rural practitioners in dealing with the recovery of development land under the Agricultural Holdings Act 1986 (AHA ’86), including the old chestnut of establishing that the land is required under a bona-fide intention to implement the change of use?

The Legislation

The ’54 Act at section 30(1)(f) provides that a landlord may oppose the grant of a new tenancy to an incumbent tenant, whose original term has expired, where:

“…on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.” 

The wording of the relevant part of Schedule 3, Case B of the AHA ’86 is:

“The notice to quit is given on the ground that the land is required for a use, other than for agriculture for which permission has been granted [etc.]”.

Where the AHA ’86 is concerned we can be reasonably certain from cases such as Paddock Investments Ltd v Lory [1975] 236 EG 803 that ‘is required’ means that where planning permission is necessary, it must have already been obtained; and that the landlord needs to establish a bona fide intention to develop the land with a reasonable prospect of doing so.

It is still just about open for a landlord to argue that ‘is required’ does not mean that planning permission has to have been obtained at the date of the notice to quit, but this is something of a minority view, yet to find a courageous enough landlord to pursue it!

In Scammell, Densham and Williams Law of Agricultural Holdings (10th edn inc. 1st supplement) at 39.35 the Editor makes it clear that the ’54 Act cases are not directly applicable because under the ’54 Act the landlord is stating an intention for the future which is established at the date of the hearing, whereas:

“It is submitted that the proper approach to this issue under Case B is a two-stage process. First, the landlord must have a settled intention at the date that the notice to quit is given requiring the land which is the subject of the notice to quit (and, in most cases, subject to the planning permission obtained) for the stated purpose. The second stage is that the landlord must establish that such requirement is to be implemented at the date that the notice to quit expires or a reasonable period thereafter.”

The Cavendish Hotel case

Cavendish Hotel does not change the position under either statute as to the time at which the intent to develop is assessed.

Cavendish Hotel establishes the need for a landlord to have a firm and settled intention to carry out the relevant works (as at the date of the hearing) and that the landlord’s purpose or motive for carrying out the works were irrelevant.

The facts of Cavendish Hotel were that the landlord opposed the tenant’s request for a new lease; on the grounds that it intended to reconstruct the premises, and it could not reasonably do so without obtaining possession.

It is fair to say that the landlord had some difficulty in putting forward a development scheme for the site which fulfilled the requirements of section 30(1)(f), whilst also complying with planning legislation and policy.

The first scheme put forward did not receive planning permission, and the landlord’s solicitors were of the view that it was, in any event, not substantial enough to amount to demolition, or reconstruction (etc.), of the premises.

The second scheme put forward by the landlord, and relied upon at the trial of the issue, involved (apparently) contrived internal works, such as lowering the basement floor, moving smoke vents, and substantial internal modifications.

The Judge at first instance found that the works were:

“…designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works’ commercial or practical utility and irrespective of the expense”.

The landlord was not shy of setting out its intentions. Essentially, if pointless works were required in order to get rid of the tenant, then they would be completed. However, rather fatally, as it turns out, the landlord admitted that it would not go ahead with the reconstruction works if the tenant left voluntarily.

Supreme Court judgement

The Supreme Court’s response to this was clear:

“Just as the landlord’s motive or purpose, although irrelevant in themselves, may be investigated at trial as evidence for the genuineness of its professed intention to carry out the works, so also they may be relevant as evidence of the conditional character of that intention. In both cases, the landlord’s motive and purpose are being examined only because inferences may be drawn from them about its real intentions. Likewise, although the statutory test does not depend on the objective utility of the works, a lack of utility may be evidence from which the conditional character of the landlord’s intention may be inferred.”

Effectively, a concession that the landlord would not bother with the works if the tenant left voluntarily, combined with the obviously contrived works, indicated that the landlord had no firm and settled intention to carry out the relevant works.

Further, ground (f) assumes that the landlord’s intention is being obstructed by the tenant’s occupation, and as such, if that intention is only conditional on there being an order (but not if the tenant gives up possession voluntarily), there is not a firm and settled intention.

Impact on Case B

So, does this add to the picture on the “bona fide intention” postulated by Lord Justice Goff in Paddock Investments?

Perhaps it does. We have not, until now, had an authority which covers a situation which is so obviously engineered to achieve vacant possession. The Supreme Court has clearly set out that whilst motive or purpose are not directly relevant to intention to carry out the works, the ‘acid test’ is whether or not the landlord would develop the premises if the tenant vacated voluntarily, that principle must surely be applicable to Case B. However, the extent to which that is ever at issue in a disputed Case B is perhaps less of an issue where landlords almost invariably want to achieve development for obvious commercial gains.

Perhaps an alternative view is that the acid test suggested by Lord Sumption in Cavendish Hotel is THE test for intention to develop, and as such supports the minority argument no planning permission is actually required.