The spectre of the unscrupulous lessor has long haunted the relationship of landlord and tenant. As Englander acknowledged, “In perceptual terms the landlord was an ogre, the hardest of hard-faced men, one who preyed upon and tormented the lives of millions”.Footnote 1 In the context of commercial leases, the need for statutory intervention was acknowledged officially towards the end of the nineteenth century.Footnote 2 Legislative control designed to preserve the tenant's business and livelihood was viewed as an imperative. The primary mischief identified was that some landlords held their tenants to ransom by demanding an exploitative rent as a condition of granting a new lease. This was particularly harsh for those tenants who had built up goodwill and paid for improvements to the premises. It was apparent that neither the operation of market forces nor the invocation of contractual rights offered an effective shield for commercial tenants at the end of their terms. Accordingly, statutory intervention was viewed as the only means through which maverick landlords could be reined in and the standards expected from a reasonable lessor imposed. Unsurprisingly, the major difficulty has always concerned the precise form that this intervention should adopt. Although the initial response was to afford the tenant compensation for the loss of goodwill, the right to a new lease was to become the preferred option. This transition from compensation to security of tenure has not, however, proved unproblematic. This is particularly so in circumstances where the tenant is deprived of the right to a new lease because the landlord can demonstrate the intention to occupy the holding for its own purposes. Although the tenant may still be entitled to claim compensation for loss of those renewal rights, the award has nothing to do with financial realities and disregards entirely any loss of tenant's goodwill. The potential deprivation of renewal rights without adequate compensation contradicts the core purpose of the legislative framework, which is to promote rather than to frustrate the business interests of the tenant. The present scope for the exploitation of the tenant's established goodwill is simply indefensible.
The current regulatory controls are to be found within Part II of the Landlord and Tenant Act 1954. The Part II provisions allow the tenant to remain in occupation at the end of the contractual term and to apply to court for the grant of a new lease at a market rent. Their purpose and policy being, as Lord Wilberforce put it, “to provide security of tenure for those tenants who had established themselves in business in leasehold premises so that they could continue to carry on their business there”.Footnote 3 Accordingly, the landlord's ability to oppose renewal is heavily curtailed and limited to the grounds set out in section 30(1)(a)–(g). Of these exceptions to renewal, some are fault based whereas others are designed to ensure that the management interests of the landlord are secured. Sited within the latter category lies ground (g), which is a mandatory and compensation ground. Section 30(1)(g) facilitates the recovery of possession in circumstances where ‘on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence’. While this style of exception enjoys some heritage in the housing sector,Footnote 4 ground (g) sits uneasily within the Part II machinery.
It is with the origins, impact and operation of section 30(1)(g) that this article is concerned. Although the tacit assumption by the law reform agencies is that ground (g) performs a justifiable role, it will be argued that such complacency is to be resisted. The present work will demonstrate that the prioritisation of the occupational needs of the landlord, with the attendant reduction of the tenant's statutory entitlement, is unwarranted, unjust and, moreover, conflicts with the founding ethos of the Part II machinery. By affording to the landlord the opportunity indirectly to buy out the renewal rights of the tenant, section 30(1)(g) produces the irony that, “compensation which was secondary, becomes primary and renewal which was primary becomes secondary, and the choice of which of these shall be first and which shall be second is given to the landlord”.Footnote 5 This is particularly worrisome in that ground (g) can readily be utilised by a landlord seeking financially to exploit the past success of the tenant's business. Put starkly, there is nothing in ground (g) to prevent a landlord recovering possession, running a business identical to that operated by the tenant and thus benefiting from that tenant's established goodwill. The inequity is underscored in that the award of compensation under section 37 for loss of renewal rights is flat rateFootnote 6 and does not reflect the merits of individual claims.Footnote 7 As one of the framers of the 1954 Act acknowledged, “This basis is, I admit, rough justice, and one may call it arbitrary.”Footnote 8 Despite the Law Commission's unlikely conclusion that the existing compensation provisions adequately deal with any unfairness as to goodwill,Footnote 9 they are clearly ill suited to ground (g).
The potential deprivation of the tenant's business goodwill without adequate recompense undeniably offends fundamental notions of fairness and human rights.Footnote 10 It also defeats the underlying purpose of section 37, which is to test the landlord's opposition and, “facilitate negotiations on the granting of the lease and prevent much dispute and litigation on its expiry”.Footnote 11 Such goals are unlikely to be attained when it is the prospect of financial advantage that both motivates the landlord's opposition and negates a preparedness to negotiate. It is, therefore, a reasonable expectation that ground (g) would embody clear and effective safeguards to deter its misuse. Remarkably, it provides scant protection for the tenant. Section 30(1)(g) does not require the premises to be needed by the landlordFootnote 12 or, indeed, reasonably required.Footnote 13 There is also no demand for the landlord to serve a pre-tenancy notice forewarning that the premises might be recovered on this ground.Footnote 14 The much-vaunted ‘five-year rule’, geared to prevent speculators buying properties over the heads of sitting tenants with the ambition of invoking ground (g), can, moreover, be easily sidestepped by a well-advised landlord.Footnote 15 The tenant's position is hampered further in that section 30(1)(g) is poorly drafted and resistant to ready understanding. This stands in defiance of the overarching policy that, “The respective rights of the parties would be clear, and could if necessary be established … without undue trouble, dubiety or expense …” and should not depend, “on the prior satisfaction of a formula or formulae whose application to the particular case would be a matter for legal argument with results not always consonant with the real deserts of the parties”.Footnote 16 Fundamental issues remain unresolved as to whether the landlord must intend to occupy the tenant's holding in an unmodified state and how long the landlord must intend to occupy or actually occupy before selling the premises on with vacant possession. No thought whatsoever has been directed to the application of ground (g) when the reversion has been severed. Similarly, there is no official acknowledgement given that the both parties might benefit from the tenant being able to retain part of its extant holding. Most compellingly, the landlord's objective intention to occupy is insufficiently tested. In contrast to section 30(1)(f) where the landlord must positively show the legal and economic wherewithal to translate its redevelopment intentions into reality, under ground (g) the onus tends to rest on the tenant to demonstrate that the landlord's intention is unrealistic.Footnote 17
This article will chart why and how the prioritisation of the landlord's occupation needs became a feature of the Part II provisions and appraise the awkward interaction between section 30(1)(g) and the poorly crafted compensation provisions. The present operation of ground (g) will be analysed in detail and a critical eye cast over the obscure and technical hurdles, and ineffectual tenant safeguards, that the landlord must successfully navigate in order to utilise this ground of opposition.
I. A History of Unjust Preferment
Reform of the law of business tenancies proved to be a slow and tortuous process.Footnote 18 While by 1918 most European countries had enacted provisions designed to protect commercial tenants,Footnote 19 it took until the Landlord and Tenant Act 1927 for the first permanent controls to emerge in England and Wales.Footnote 20 A further 27 years were to elapse before these protective measures were reformulated in Part II of the Landlord and Tenant Act 1954.Footnote 21 On both occasions, the impetus for statutory regulation arose in a post-war period when the appetite for reform was whetted by extreme market distortions, an anti-profiteering ethos, and the need to sustain economic recovery. In such times the promotion of business tenants' rights assumed a much-heightened political significance. As Englander puts it, “In political terms landlords were a liability. Members of Parliament hastened to flee from them as if before a plague”.Footnote 22
Although each statutory code was geared in a markedly different fashion, the fundamental tenets common to both were compensation and security of tenure. These safeguards were, moreover, intended to have minimum impact upon the common law rights of the landlord. The commendable ambition was to achieve a working balance between the preservation of the landlord's investment interest in the property, the protection of the tenant's business goodwill and the advancement of the public interest in the growth and modernisation of the commercial sector.Footnote 23 Unfortunately, the Landlord and Tenant Act 1927 was an overly cautious response to the problems faced by business tenants and failed to achieve its policy objectives. The 1927 Act extended the rights of business tenants by facilitating compensation for the loss of ‘adherent goodwill’.Footnote 24 A new lease could be awarded at the discretion of the court and in the delimited circumstances where the compensation otherwise payable was inadequate to reimburse the tenant for the loss of conventional goodwill.Footnote 25 The initial emphasis, therefore, was upon safeguarding the financial interests of the tenant rather than ensuring the continuation of that tenant's business.Footnote 26 Undeniably, the compensation scheme was poorly devised, overly complex and generally unfit for purpose.Footnote 27 Its underpinning philosophy was flawed for, as the Leasehold Committee admitted in 1949, “The business tenant occupies his premises in order to trade or to pursue his profession: he does not wish to be compensated for being prevented to do so”.Footnote 28 A more sweeping measure was, therefore, necessary and, albeit belatedly, Part II of the Landlord and Tenant Act 1954 brokered a more effective response and radically overhauled the pre-existing provisions. The Part II scheme represents a significant retreat from market forces and, by recognising that financial safeguards do not offer sufficient protection, affords security of tenure as the primary entitlement. Compensation survives, but only as a secondary claim and in much-modified form, divorced from the concept of goodwill and founded upon the loss of renewal rights.Footnote 29
The precursor to ground (g) is to be found in section 5(3)(b) of the Landlord and Tenant Act 1927. Within the 1927 scheme, however, this exception to renewal was of minor importance. Under a regime where even a prima facie entitlement to a new lease could rarely be established, it was seldom invoked. As the 1954 Act is radically dissimilar in ethos and operation to its predecessor, there was no compelling reason why the refashioned machinery should mirror the earlier model. Unsurprisingly, there were to be major differences. For example, the 1927 Act afforded protection only in circumstances where the tenant or predecessor had been in occupation for business purposes for a period of at least five years. Although in 1950 it was proposed in the Final Report of the Leasehold Committee that this qualifying period should be reduced to three years,Footnote 30 no such limitation was to find its way into the Part II provisions. Similarly, contracting out had been permissible under section 9 of the 1927 Act in return for ‘adequate consideration’. There was to be no ability to contract out of the revised renewal provisions.Footnote 31 Most pertinently, the modernised version did not reproduce the same exceptions to renewal. The 1927 Act had allowed the landlord to oppose renewal on the basis that it had offered to sell its interest in the premises to the tenant. In other circumstances, renewal was to be declined when it would be inconsistent with the interests of good estate management. As these grounds were rooted in compensation offering the primary entitlement, neither was to find its way into the Part II renewal machinery.
A similar fate appeared to await the owner occupation ground in that, in 1949, the Interim Report of the Leasehold Committee proposed that it too should be jettisoned.Footnote 32 The prioritisation of the occupation needs of the landlord was viewed as a major threat to the efficacy of any future renewal scheme. This concern was not, however, evident within the recommendations of the Final Report, where a differently constituted Leasehold Committee adopted a markedly different stance. In the intervening year, the Leasehold Committee had clearly become much more landlord-friendly. The Committee now felt that a landlord, who genuinely sought to resume occupation at the end of the tenant's lease, should not be prevented from doing so. The imposition of a blanket restriction was thought to be an unjustified invasion of the landlord's proprietary rights and a potential cause of hardship for the small landlord.Footnote 33 The Final Report was, moreover, prepared to push the boundaries of the owner occupation ground to extremes by proposing that the landlord should always be allowed to buy out the tenant, irrespective of motive or needs. In return, the tenant would be entitled to compensation amounting to a complete indemnity for the loss and expense incurred.Footnote 34 This proposal was not destined to find its way into the 1954 Act. A much-softened alternative was suggested in circumstances when the landlord could genuinely show that it sought possession in order to accommodate its own business or residential needs.Footnote 35 In this scenario, the tenant would be entitled to compensation in lieu of renewal. Although the Final Report recommended that this compensation should be based upon the unsatisfactory and unworkable concept of adherent goodwill,Footnote 36 a different calculus was to apply when the landlord sought to operate a business similar to that run by the tenant. The Leasehold Committee concluded that, when the purposes for which the landlord intends to use the premises have been made more valuable by the previous business use, compensation should be assessed with reference to that increased value.Footnote 37
In the immediate wake of the Final Report, no permanent reform was implemented. Indeed, there was initial uncertainty as to the best way to proceed with a scheme based upon lease renewal rather than compensation. In 1953, the Government admitted that neither of the schemes put forward by the Leasehold Committee were “wholly satisfactory” and concluded that, “a new approach is required”.Footnote 38 This new approach maintained the preferment of the landlord's occupation needs. In return, the tenant would be entitled to flat-rate compensation for loss of renewal rights. Although the Government envisaged that, “Under such a scheme the parties would have every incentive to settle by agreement on reasonable terms without going to the Tribunal”,Footnote 39 it is ironic that ground (g) offers various inducements for the landlord to act unfairly and unreasonably. First, the landlord might seek to renew at a higher than market rent and utilise ground (g) as a bargaining tactic. If the tenant is in a weak bargaining position, that tenant might easily be held to ransom.Footnote 40 Hence, the tenant may be faced with the same stark choice as offered at common law. Secondly, it is possible that the landlord is a business rival of the tenant and seeks to invoke ground (g) in order to put its rival out of business. This is a permissible tactic for, as noted by Ward L.J., “If a landlord has a genuine intention to set up his own business, his motive becomes irrelevant”.Footnote 41 The landlord might easily engineer a substantial financial gain from the exercise. Thirdly, the landlord may seek to occupy in order to open a business similar to that operated by the tenant. For the loss of its business and goodwill, the tenant will receive a compensatory award that ignores real losses and actual gains. The derisory nature of this award was evident in Gatwick Parking Service Ltd. v Sargent.Footnote 42 There the tenant faced the loss of its successful off-airport parking business in return for compensation assessed at a meagre £13,750. In the absence of any direct protection for goodwill, this produces, “a worse position than that which existed under the Landlord and Tenant Act 1927”.Footnote 43 Section 30(1)(g) may, therefore, be viewed as compromising the founding policy objectives of regulatory control. While it is a provision that may serve well the landlord's longer-term interests in the property, potentially it threatens the tenant's business goodwill, gives rise to an arbitrary injustice and, by catering for a switch from commercial to residential use, may undermine economic growth and the wider public interest.
From the tenant's perspective, the existence of goodwill will often be of significant value. It is property that exists independently of the lease and, hence, remains a business asset that may be sold or, indeed, exported to new premises.Footnote 44 The existing compensation provisions are premised solely on the loss of renewal rights and designed only to offer relocation assistance to the tenant. The assumption is that the tenant is able, if it chooses, to continue its business from alternative premises. The economic viability of such plans may, however, be under serious threat where the landlord seeks to operate a business similar to that previously run by the tenant. The ability of the landlord to gain directly from the past enterprise of its tenant undeniably flouts the anti-profiteering ethos that underpins the Part II provisions. From a contemporary perspective, it is simply unthinkable that Parliament should facilitate the deprivation of the tenant's property without adequate compensation. Although the term ‘expropriation’ is, as Vos J. observed, “a pejorative way of putting the point”,Footnote 45 from the tenant's perspective it might be thought of as an apt descriptor. Significantly, the impact of ground (g) on the tenant's goodwill (and unlike with the defeat of the tenant's contingent right to a new lease) appears to contravene Article 1, Protocol No. 1 of the European Convention on Human Rights.Footnote 46 This entitles every person to the peaceful enjoyment of his possessions and provides that no one shall be deprived of their possessions except in the public interest.Footnote 47 The term ‘possessions’ is to be interpreted widelyFootnote 48 and, most certainly, encompasses the tenant's business goodwill.Footnote 49 Article 1, moreover, extends to laws affecting purely private transactions.Footnote 50 Unlike opposition under the redevelopment ground (f), there is not a scintilla of public interest underlying section 30(1)(g). Indeed, it upsets the fair balance that should be struck between the protection of property rights and the general interest.Footnote 51 Accordingly, the deprivation of goodwill, without any compensatory award reflecting the value of the asset taken, manifestly represents a disproportionate and serious interference with the tenant's rights. It imposes an unacceptable and excessive burden on the tenant that simply cannot be legitimised in the absence of an effective compensation package.Footnote 52 Although there is clearly a gap in the protection which the legislature intended, it is not possible to interpret ground (g) and section 37 in a manner that can make them compatible with the Convention rights and satisfy section 3 of the Human Rights Act 1998. On any reading of the Part II provisions, it cannot be determined that the tenant is entitled to compensation for loss of goodwill.Footnote 53 Hence, the only route open is via section 4 and a declaration by a higher court of incompatibility. This process enables the court to signal that legislative reform should be undertaken. As this must arise in the course of proceedings and is not retrospective, the human rights compatibility of ground (g) might not be tested for some time.
In recognition that section 30(1)(g) offers the potential for tenant exploitation without adequate redress, certain barriers must be surmounted before the landlord's opposition can prevail. The responsibility of the court is to ensure that the recovery of possession by the landlord is justified within the framework of ground (g). Proponents of this exception to renewal rely heavily upon the nature and effectiveness of these protective measures. First, there are limitations placed upon who can successfully invoke ground (g). It is only the ‘competent landlord’ who is entitled to recover possession for personal use. A further restriction is imposed by section 30(2) and this is commonly called the ‘five-year rule’. This prevents reliance upon ground (g) by a landlord who has acquired its interest in the premises within five years of the termination of the contractual tenancy. The design of section 30(2) is to deter a speculator purchasing tenanted property with the ambition of obtaining vacant possession and shortly afterwards re-letting at a higher rent.Footnote 54 Secondly, there is a restriction upon the mode of occupation that will suffice for the purposes of this exception to renewal. Controls are imposed as to what must be occupied, why occupation is sought, when it is to commence and for how long it must subsist. Thirdly, the landlord must demonstrate that it has an unequivocal and fully formed intention to occupy and this must be in provable form by the date of the substantive hearing of its opposition.Footnote 55 The need to demonstrate an appropriate intention invites the court to investigate the bona fide nature and contextual reality of the landlord's assertions. Each safeguard requires further analysis.
II. The ‘Competent Landlord’
Section 30(1)(g) speaks of it being ‘the landlord’ who must seek to occupy the tenant's holding. While the equivalent provision found in the 1927 Act allowed opposition also on the basis that the holding was to be occupied by the landlord's adult son or daughter, this liberality did not make its way into the Part II machinery.Footnote 56 The relevant landlord for the purposes of ground (g) is the ‘competent landlord’ who, in the absence of any subleases, is the freeholder. If sub-tenancies exist, however, the position is more complex and the identity of the competent landlord is apt to change. This is because section 44 provides that the competent landlord will then be the lessor next up the chain from the occupying tenant that has at least 14 months remaining on its intermediate tenancy. This ceiling ensures that the landlord making the key decisions has more than a nominal reversion and will have a sufficient interest and incentive to take proper action in relation to the renewal process. It follows, therefore, that the identity of the competent landlord might alter during the period between the service of the landlord's renewal documentation and the date of the hearing. If this occurs, it is the new competent landlord's proposals that assume relevance. As Lord Denning M.R. admitted in Marks v British Waterways Board, “If the subsequent landlord can prove that at the date of the hearing he has the requisite intention, the new lease must be refused”.Footnote 57 The aspirations of a non-competent landlord are simply irrelevant.Footnote 58
A potential problem may arise when there is a severed reversion (i.e. there remains one tenancy, but the freehold title is divided). Unlike with joint landlords, it is a requirement that all the severed reversioners join in on the service of a section 25 termination notice on the tenant.Footnote 59 Hence, a notice served by one reversioner is void.Footnote 60 Adopting this approach in relation to section 30(1)(g), it must follow that, when there is a split reversion, the landlords collectively must intend to occupy the entirety of the tenant's holding for a unified business purpose or as a residence for them all. The unlikely prospect of this coincidence ever occurring effectively sterilises the effect of ground (g) when the reversion is severed.
As indicated above, a change in the identity of the landlord will not usually interfere with the renewal process.Footnote 61 As Robert Walker L.J. put it, “one successive landlord is very closely identified with any successor of his”.Footnote 62 By way of an exception to this general sentiment, section 30(2) imposes what is usually described as the ‘five-year rule’.Footnote 63 This rule was fashioned directly to tackle a mischief, rife in the post Second World War era, of canny property speculators buying over the freehold heads of sitting tenants, “with the object of forthwith evicting a tenant on the expiration of his tenancy”.Footnote 64 Unfortunately, the language of section 30(2) is highly technical and obscure and the complex factual settings in which the construction of section 30(2) may arise are apt to cause further difficulty. Such was evident in VCS Car Park Management Ltd. v Regional Railways North East Ltd.,Footnote 65 which dealt with the reorganisation of the railways under the Railways Act 1993. Robert Walker L.J. had to operate section 30(2) in a context that had arisen from, “a series of schemes and conveyancing manoeuvres of Byzantine complexity”.Footnote 66
Section 30(2) excludes from ground (g) those landlords who have acquired the reversion, by purchaseFootnote 67 or grant,Footnote 68 ‘after the beginning of five years which ends with the termination of the current tenancy’.Footnote 69 This provision only concerns opposition under ground (g) and is not engaged in circumstances when the current landlord is also the grantor of the tenancy.Footnote 70 For these purposes, the date of ‘purchase’ is deemed to be the time that contracts are exchanged.Footnote 71 If there is doubt as to whether a purchase has occurred, the court will look at the whole transaction, including any preceding contract.Footnote 72 Where the landlord's interest is leasehold, and a contract preceded the acquisition of that interest, the relevant date of creation is the date of the contract. Absent a separate contract, therefore, the general rule is that the relevant date is when the lease is executed.Footnote 73 In circumstances where the landlord is a company, and the person who has the controlling interest seeks to occupy, reliance on ground (g) will be barred if the controlling interest was acquired within the same time frame.Footnote 74 The timing element of section 30(2) might also give rise to difficulties where the landlord's interest is subject to a trust and it is a beneficiary who seeks to be treated as the landlord and to rely upon ground (g). In this scenario, the landlord's interest will be regarded as having been created when the trust was declared and not when the beneficiary landlord actually acquired the interest.Footnote 75
A succession of tenancies in favour of the landlord is to be treated, for the purposes of section 30(2), as a single tenancy. In Artemiou v Procopiou,Footnote 76 the landlord held under a lease that was renewed within the five-year period. It was held that the relevant date was when the landlord's interest was originally created. Danckwerts L.J. explained, “This construction covers equally an interest of a landlord under one long period by one lease or under a series of leases”.Footnote 77 Similarly, section 30(2) is not activated when the landlord undergoes a change of status during the five-year period. In VCS Car Park Management Ltd. v Regional Railways North East Ltd.,Footnote 78 the landlord was the freeholder and subsequently became a leaseholder with successive tenancies. This shift of status did not impede the landlord's opposition. As Sir Richard Scott noted, “The mischief at which the Act is aimed is not offended by allowing such a person to object to the grant of a new tenancy under ground (g)”.Footnote 79
While the ambition of section 30(2) might be laudable, its effect is unduly curtailed. First, it offers the tenant only retrospective protection against the landlord assigning the reversion shortly before the tenancy lapses. Although ground (g) will be unavailable to a landlord who has already formed the intention to sell by the date of the hearing,Footnote 80 the tenant is not protected, “against the risk that the landlord takes possession of the premises for the purposes of his own business but then quickly sells them”.Footnote 81 In like vein, section 30(2) seemingly does not prevent a landlord, once the section 25 notice is served, from selling the reversion, leaving it open for the new landlord to rely on ground (g).Footnote 82 Although this distinctly odd outcome appears to be part of the deliberate design of section 30(2),Footnote 83 it jeopardises the efficacy of the five-year rule.
Secondly, it is necessary that, at all times since the purchase or creation of the landlord's interest, the holding has been subject to a tenancy within the Part II provisions. A cessation of business use or occupation at any time within that period will, therefore, render section 30(2) inoperative.Footnote 84 This stands in contrast with the general renewal scheme, which tolerates a tenant moving in and out of business occupation during the contractual term or, indeed, its subsequent continuation.Footnote 85 It is, therefore, surprising that a different stance is taken in relation to the five-year rule where the emphasis is upon the landlord's acquisition of the reversion. There appears to be no policy justification for this difference of treatment.
Finally, and even if the five-year rule operates as a bar, a landlord might still derive benefit by, albeit unsuccessfully, invoking section 30(1)(g). Provided that the landlord can satisfy the other aspects of ground (g), the court might order a new lease of much shorter duration than would otherwise have been granted. This occurred in Wig Creations v Colour Film Services where a three-year lease was granted instead of the 12-year term sought by the tenant.Footnote 86 Denning L.J. explained, “The policy of the Act is to give a landlord (who has purchased more than five years ago) an absolute right to get possession for his own business; leaving it to the court to do what is reasonable if he has purchased less than five years. In doing what is reasonable, the five-year period is a factor which is permissible for the judge to take into account”.Footnote 87 This indirect benefit for a landlord who has failed to defeat the tenant's application undermines the justification for the five-year rule and, ironically, promotes the very mischief at which it is targeted.
III. ‘Occupation’ in Context
The concept of occupation lies at the heart of Part II of the Landlord and Tenant Act 1954. It offers the tenant entry into the statutory scheme and shapes entitlement in terms of the subject matter of any new lease and, alternatively, the availability and amount of compensation for loss of renewal rights.Footnote 88 The term ‘occupation’ remains undefined in the 1954 Act and it has been for the courts to clothe it with meaning, tailored to the particular context in which the term appears and the factual setting in which the claim to occupation is made.Footnote 89 To complicate matters further, the concept is subject to statutory modification (e.g. relating to representative occupation), judicial gloss (e.g. when there are rival candidates to the role of occupier) and an unpredictable degree of cross-fertilisation between several statutory provisions.Footnote 90
The finding of occupation is essentially one of fact, dependent upon the physical use and control of the premises. In difficult cases, the decision will be reached with close regard to the purpose for which the concept of occupation is employed and the consequences that flow from the presence or absence thereof. In the more straightforward scenario, and absent any rival claimant to the status of occupier, the courts are apt to be liberal.Footnote 91 Accordingly, a tenant may still be in occupation even though not physically present at the premisesFootnote 92 and where the premises are seasonally closedFootnote 93 or temporarily unusable.Footnote 94 Although the key authorities concern occupation by the tenant, there is no policy justification or authority to suggest that a different line of reasoning will be adopted with ground (g).
Section 30(1)(g) does not require the landlord personally to occupy the premises. The landlord can occupy through an agent,Footnote 95 a manager,Footnote 96 a partnership,Footnote 97 a beneficiary under a trustFootnote 98 and a company that is a member of a group of companies that includes the landlord company.Footnote 99 Nevertheless, ground (g) cannot assist the landlord who seeks possession so that a spouse can operate a business from the holding.Footnote 100 Although traditionally ground (g) was not engaged when a company landlord sought possession in order to allow its controlling shareholder to occupy (or, indeed, vice versa), this is now catered for by section 30(1A),(1B). For the purposes of ground (g), these provisions lift the corporate veil and assimilate the company and the person who controls it.
Occupation of the ‘Holding’
The Part II provisions contain directions as to what is to be occupied for the purposes of ground (g) and require that the landlord must intend to occupy the entirety of the tenant's ‘holding’.Footnote 101 Occupation of part only does not suffice, regardless of how substantial the part may be.Footnote 102 Nevertheless, a landlord can simply express the intention to occupy the entire holding without any requirement that each and every part of it be physically used for the landlord's business purposes.Footnote 103 This all or nothing approach, therefore, achieves little and stands in contrast with section 31A(1)(b), which operates in the context of ground (f). This provision applies where the landlord intends to redevelop part only of the holding and limits the landlord's recovery of possession to the part on which the works are to be carried out. If willing, the tenant is entitled to a new lease of the remainder, provided that it is an economically separable part of the original holding. In the context of ground (g), it is not difficult to envisage the utility of an equivalent provision. Its implementation might encourage the landlord to moderate its stated intentions and facilitate the continuation of the tenant's business, albeit from reduced premises. It would also have some attraction for landlords seeking to rely on ground (g) in circumstances where the reversion has been severed. The reform could allow a sufficient intention to occupy part of the holding to be demonstrated by, say, one severed reversioner alone or, on a collective level, allow the severed reversioners to oppose in circumstances where each seeks to occupy their respective parts for different business purposes. While the Law Commission felt that there was, “some attraction in this extension”,Footnote 104 the issue was shelved without further analysis as a significant change of policy that would need wider consultation.Footnote 105 Although the same facility was afforded to the tenant under the Landlord and Tenant Act 1927, there is scant prospect of it being officially revisited within the foreseeable future.
For the purposes of ground (g), the term ‘holding’ has been the subject of some judicial scrutiny. In Nursey v P Currie (Dartford) Ltd.,Footnote 106 the landlord invoked ground (g) with the intention of operating a petrol station on the holding. It was, however, first necessary to demolish the existing buildings and rebuild.Footnote 107 Before the Court of Appeal, the landlord's opposition failed. Wynn-Parry J. reasoned that the landlord did not intend to occupy the tenant's holding, but rather sought to occupy an entirely different holding in a redeveloped form. The court refused to take into account the wider undertaking that the landlord had in mind. This approach is, however, highly problematic and has been confined to circumstances where there is to be the demolition and replacement of existing buildings.Footnote 108 Hence, if the holding is bare land, ground (g) can be pleaded successfully even though the landlord's intention is to build upon the site once in occupation.Footnote 109 In JW Thornton Ltd. v Blacks Leisure Group,Footnote 110 the appellate court once more attempted to distance itself from the straightjacket of precedent. Nursey was distinguished on the basis that the demolition and reconstruction work proposed here was of an insubstantial nature.Footnote 111
The decision in Nursey v P Currie (Dartford) Ltd. is eminently challengeable and has not escaped judicial criticism. In Method Developments Ltd. v Jones,Footnote 112 Salmon L.J. dismissed the decision as wrong and refused to follow it. This rejection has much to commend it. The term ‘premises’ makes no appearance in the statutory definition of the tenant's holding and, unlike the redevelopment ground (f), does not even feature in the language of section 30(1)(g).Footnote 113 It is, therefore, implausible that Parliament would intend the meaning of ‘holding’ for the purposes of ground (g) to be tempered in this unnecessary fashion.Footnote 114 There is, moreover, no policy justification for allowing the landlord to recover the holding only on the understanding that it remains in a substantially unaltered state. Indeed, this would run counter to the promotion of economic growth and hinder the regeneration of commercial property.Footnote 115
The understandable attempts to sidestep the Nursey approach have fostered artificial and illogical distinctions, which themselves are incompatible with the underlying philosophy of ground (g). The provision is unconcerned with what type of business the landlord intends to pursue, whether there are any buildings on the holding and, if there are, whether the landlord intends to physically occupy every building in pursuit of that business. It must follow that a proposed change in the appearance or the use of the holding should not impede the landlord's legal ability to occupy.Footnote 116 Due to the lingering uncertainty promoted by the Nursey case, if the landlord intends to carry out works of demolition and reconstruction then it should rely upon both grounds (f) and (g).Footnote 117
Temporal Concerns
While the Part II machinery features numerous time limits with which the parties must comply, it is surprisingly vague as to when exactly the landlord must intend to occupy and utterly silent as to how long that occupation must be maintained. Section 30(1)(g) states simply that occupation is to occur ‘on the termination of the current tenancy’.Footnote 118 This indicates that the landlord must have more than a generalised ambition to occupy in the indeterminate future.Footnote 119 Occupation need not, therefore, be immediate, but as emphasised in Method Developments Ltd. v Jones it must be intended to occur within a reasonable time following the date of termination.Footnote 120 The determination of reasonableness is an issue of fact and the court must adopt a sensible and business like attitude as to the latest time by which occupation must commence.Footnote 121 By way of illustration, in London Hilton Jewellers v Hilton International Hotels Ltd.,Footnote 122 it was admitted that a delay of a month or so would not be held unreasonable. Further guidance might be distilled from section 31(2), which deals specifically with the timing of landlord's works of redevelopment for the purposes of ground (f). This states that the redevelopment works must be intended to begin within 12 months of the end of the tenancy and, if not, the landlord is unable to rely on ground (f). It is, at the least, arguable that a similar cut-off point should apply also to the taking up of occupation for the purposes of ground (g). There is no discernible policy justification for maintaining this distinction between the two grounds of opposition.
There is no reference in section 30(1)(g) as to the duration of the landlord's intended occupation.Footnote 123 The general rule that has emerged is that the landlord must intend to occupy for more a temporary period.Footnote 124 Understandably, the landlord cannot rely upon ground (g) when the occupation is merely to redecorate or refurbish.Footnote 125 By way of an exception to the general rule, an intended occupation of a number of months may suffice, but only when there is intended to be no outright sale of the premises to a cash purchaser.Footnote 126 Such was demonstrated in Willis v Association of Universities of the British Commonwealth, where Lord Denning M.R. took the view that a short period of occupation before, for example, a father passing the business over to his son would suffice.Footnote 127 Salmon L.J. considered the position of a landlord, who had not long to live, seeking possession under ground (g). He concluded that, in such circumstances, the landlord could still succeed in its opposition.Footnote 128 Salmon L.J. discussed the further scenario of when, following a restructuring exercise, a landlord company was to be dissolved. If dissolution occurred before the hearing, the new landlord would stand in the shoes of the old. In relation to a dissolution planned to occur after the hearing, he felt that the landlord could still rely on ground (g) as, “the law does not make the rights of the parties depend on the fortuitous circumstance whether the transfer is executed sooner than later”.Footnote 129 This line of reasoning is also on all fours with the five-year rule that, as considered above, bites only on the occurrence of a purchase or grant of the reversion.
The timing aspect of section 30(1)(g) was revisited in Patel v Keles where the traditional distinction between a sale and other types of disposition was reaffirmed.Footnote 130 There the landlord sought to take occupation of the tenant's shop premises with a view to operating a similar business. Although the landlord was prepared to offer a vague undertaking that he would operate the business for a period of at least two years,Footnote 131 the evidence indicated that he would retire in four years time. It was highly likely that, after the two-year period, a sale of the premises would occur. Arden L.J. had to decide whether the realistic prospect of this later sale barred the landlord from successfully relying upon ground (g). Drawing an analogy with the five-year rule, she concluded that the prospective transfer would, if made before the hearing, have fallen foul of section 30(2). The court should not, therefore, allow a landlord to circumvent the five-year rule merely by the postponement of the intended sale until after the hearing.Footnote 132 The likelihood of sale is relevant when determining whether the landlord can establish a genuine intention to occupy.Footnote 133 In these circumstances, the court concluded that Mr Keles had not made out his ground of opposition.
A possible half-way house had been envisaged in 1950 by the Leasehold Committee when it suggested that, unless the change of plan was due to unforeseeable factors outside the landlord's control, additional compensation should be awarded to the tenant if the landlord never occupies or occupies for less than a prescribed minimum period.Footnote 134 With scant discussion, this eminently sensible proposal was rejected by the Law Commission who felt that it was not justifiable to distinguish between the tenant of a landlord who carried out its intention and the tenant of one who did not.Footnote 135 This reticence is as surprising as it is counter-intuitive. The existence of ground (g) is founded upon the landlord's actual occupation of the premises and this assumption operates as the sole justification for the shift from renewal to compensation. It might be argued, moreover, that the more unpalatable distinction is, as currently drawn, between the landlord who reaches the decision to sell prior to obtaining possessionFootnote 136 and the landlord who reaches the identical decision the day after taking possession.Footnote 137
Purpose of Occupation
Section 30(1)(g) requires that the occupation of the holding be, ‘for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence’.Footnote 138 The grammatical structure of ground (g), therefore, suggests that a partial use of the holding for residential purposes alone will prove insufficient.Footnote 139 As the residential aspect of ground (g) is seldom invoked, this issue of interpretation has yet to be resolved. It is, however, clear that a mixed use is permissible.Footnote 140 The landlord could, for example, recover possession of a shop with a flat above and occupy for both purposes or partly for the purposes of a business. As regards a company, it must follow that the residential use is by an agent or employee. It is of no defence to the tenant to argue that the landlord has other residences that can be occupied.Footnote 141 The court should, instead, focus upon whether the holding is to be a permanent place of abode (i.e. a complete home) for the landlord.Footnote 142 In Shecrum Ltd. v Savill,Footnote 143 the premises comprised two separate flats that the tenant occupied for business purposes. The landlord wanted to recover possession in order to live in one flat and use the other as a study, guestroom and storage space. This enabled the court to conclude that the landlord intended to occupy the entire holding. It will not be sufficient that the landlord intends to use the property casually and rarelyFootnote 144 or to sublet on taking possession.Footnote 145 The needs of the landlord will, however, focus usually upon the recovery of possession for prospective business use. This tendency has served to obscure more fundamental issues as to why and whether the residential needs of the lessor should outweigh the commercial interests of the tenant. There is no modern justification underlying this preference, which is seemingly a remnant of the small shopkeeper activism that dominated the political landscape until 1954.
The term ‘business’ is, as Lord Diplock observed, “an etymological chameleon …”.Footnote 146 It is defined by section 23(2) as including a trade, profession or employment and any activity carried on by a body of persons, whether corporateFootnote 147 or unincorporated.Footnote 148 This broad based understanding of ‘business’ captures, as Lindley L.J. put it, “almost anything which is an occupation, as distinguished from a pleasure – anything which is an occupation or a duty which requires attention is a business”.Footnote 149 The actual making of a profit for, say, shareholders and members is, moreover, not essential.Footnote 150 In Hawkesbrook Leisure Ltd. v Reece-Jones Partnership, a not for profit company limited by guarantee, which operated a number of sports grounds and social clubs, was held to fall within section 23(1).Footnote 151 Conversely, financial gain is not itself conclusive that it is a business that is operated.Footnote 152 There does, however, have to be some commercial element involved.Footnote 153 As Widgery L.J. put it in Abernethie v AM & J Kleiman Ltd., “what a man does in his spare time in his home is most unlikely to qualify for the description of ‘business’ unless it has some direct commercial involvement in it …”.Footnote 154
The word ‘trade’ is of narrower scope than ‘business’. As demonstrated in Wetherall v Bird,Footnote 155 this term connotes the activity of buying and selling, usually with a profit making ambition.Footnote 156 The understanding of a ‘profession’ is less precise,Footnote 157 but clearly embraces lawyers, doctors, accountants, architects, clergy and the like. In less clear-cut claims, the court must adopt a commonsense stance. In Abernethie v AM &J Kleiman Ltd., the court rejected the notion that the operation of the voluntary Sunday school could be classified as a profession. As Harman L.J. noted, “It is not carried on professionally: it is carried amateurishly, just the opposite to ‘professionally’”.Footnote 158 Within the Part II machinery, the term ‘employment’ is sufficiently flexible to cover most business occupations and is reflective of the fact that profits can be generated in many ways.Footnote 159 It has been held to include the operation of a teaching hospitalFootnote 160 and the occupation of a lecturer.Footnote 161 In the Abernethie case, however, the running of the Sunday school was not regarded as an employment. It must, as Harman L.J. observed, “mean something much more regular than that. It means, I should have thought, either employing somebody else or being employed by someone else”.Footnote 162
It is to be recalled that section 23(2) extends the meaning of business to include ‘any activity’, but this liberality only relates to bodies and corporations.Footnote 163 In Secretary of State for Transport v Jenkins,Footnote 164 a loose and informal farming collective was regarded as ‘a body of persons’ for these purposes. It did not matter that there was no membership list, no constitution and no membership fee charged. As Millett L.J. explained, “The expression must connote some involvement or participation in a common activity other than the mere joint ownership of the property”.Footnote 165 The activity alluded to in section 23(2) has been held to include, for example, the running of a members' tennis club,Footnote 166 the provision of a public park,Footnote 167 the operation of a hospital,Footnote 168 the running of a restaurant,Footnote 169 and the intermittent use of a garage for storage purposes.Footnote 170 Not all use will, therefore, suffice. In Hillil Property & Investment Co v Naraine Pharmacy, Megaw L.J. acknowledged that, although different from a trade, profession or employment, “an activity for this purpose … must be something which is correlative to the conceptions involved in those words”.Footnote 171 Accordingly, in Abernethie v AM & J Kleiman Ltd. the court doubted whether the running the Sunday school for one hour a week could be described as an activity for the purposes of section 23(2). Put simply, there was no business element to that use.
The authorities relating to the landlord's business use for the purposes of section 30(1)(g) understandably tread a similar path. The landlord has been able to recover possession so as to operate a community centre managed in conjunction with a local church,Footnote 172 to use the holding for storage purposes ancillary to the landlord's businessFootnote 173 and to utilise the holding for car parking purposes for visitors and staff to the landlord's adjacent premises.Footnote 174 Nevertheless, it is not always entirely safe to rely on authorities concerning the operation of section 23(1). While the definition of what amounts to a business purpose is identical, a major difference is that the tenant's occupation must be of ‘premises’. There is, however, no reference to premises in ground (g). This distinction might assume significance in, say, the scenario where the person claiming occupation is in the business of letting property. Under section 23(1), the lessee would neither be in occupation nor operating a business from the premises once those premises have been sublet.Footnote 175 Nevertheless, if the landlord seeks occupation in order to rent out premises on part of the holding and, say, provides management and other services from another part of the holding, the landlord could still fall within ground (g).Footnote 176 It is to be recalled that there is no requirement that every part of the holding has to be used for the purposes of the landlord's business. Unlike with section 23(1), there is no policy reason to prevent the landlord being in occupation of the entire holding and the tenant being in occupation of an individual unit within the premises. The option to oppose renewal solely on the basis of the landlord's residential requirements also indicates that there should be some further dilution of the meaning of ‘business’ for the purposes of ground (g). Unfortunately, the effects of this intermixture still remain unclear.
As previously emphasised, there is generally nothing to prevent ground (g) being relied upon by a landlord who intends to run a similar business to that previously operated by the tenant.Footnote 177 It matters not that there are alternative premises available to accommodate the landlord's businessFootnote 178 or that the business is to be managed by a third party.Footnote 179 Following the decision of the county court in Daleo v Iretti,Footnote 180 however, it is arguable that the landlord will be disqualified from doing so if, on the grant of the lease, the existing goodwill of the business had been expressly assigned by the landlord to the tenant. In Daleo, the landlord carried on a café business from premises in Camden. She granted a lease of the premises and assigned absolutely the goodwill to the tenants in return for a substantial financial sum. She later opposed renewal on the basis of section 30(1)(g) and sought to resume her former business activity. Judge Leslie concluded that, as the assignment of goodwill was not limited to the duration of the lease, the landlord's plans amounted to the derogation from the grant of goodwill. The landlord was, thereby, unable to rely on ground (g).Footnote 181
IV. The Landlord's ‘Intention’
No attempt is made within Part II of the Landlord and Tenant Act 1954 to define the concept of ‘intention’. As it enjoys a pivotal role within the operation of both grounds (f) and (g), much judicial attention has been devoted to the issue of what constitutes a sufficient intention for these purposes and the manner in which that intention is to be proved. Nevertheless, it remains, “a simple English word of well-understood meaning … to be answered by the ordinary standards of common sense”Footnote 182 and should, “be given its ordinary and natural meaning”.Footnote 183 The court must evaluate the landlord's intentions from both a subjective and an objective perspective.Footnote 184 In the context of ground (g), this requires the landlord to prove that the commitment to occupy for business or residential purposes is bona fide and that there is a realistic prospect of bringing about that occupation for the specified purposes. A subjective desire is insufficient unless there is also evidence of the objective ability to occupy.Footnote 185 The landlord's proposals must have, as Lord Asquith explained in Cunliffe v Goodman, “moved out of the zone of contemplation – out of the sphere of the tentative, the provisional and the exploratory – into the valley of decision”.Footnote 186
The modern analysis of the court's approach to assessing the landlord's intention is to be found in Zarvos v Pradhan.Footnote 187 This case concerned a tenant who ran a modest eating establishment on the demised premises. The landlord wanted possession with the ambition of opening an upscale eatery and wine bar on the tenant's holding. At first instance, the landlord's opposition failed. There was some question raised as to the landlord's bona fides and, due to his reluctance to produce evidence as to his financial affairs, it was concluded that there was no reasonable prospect of his professed intentions becoming reality. On appeal, Ward L.J. rejected any need for a sequential approach, accepting that, “Ultimately there is a single question for the judge to decide … does the landlord on the termination of the current tenancy intend to occupy the holding for the purposes of a business to be carried on by him therein?”Footnote 188 Ward L.J. emphasised that, absent a genuine intention to operate the business, “The landlord falls at the first fence. One need not investigate the reality or the fantasy of his business plan”.Footnote 189 If, however, there is a lack of reasonable prospects the landlord's bona fides need not be considered. Ward L.J. viewed the objective strand as existing, “precisely to cater for the case where the landlord does genuinely believe in what he says he intends to do”.Footnote 190
As to the subjective intention to occupy, it is possible that the court might accept the uncorroborated sworn testimony of the landlord.Footnote 191 Nevertheless, the court is chary that the landlord might assert an intention at the hearing, but have a change of heart once in possession.Footnote 192 In such circumstances, and if the opposition succeeded due to a misrepresentation or concealment of a material fact by the landlord, the tenant can claim additional compensation under section 37A.Footnote 193 This is, however, a diluted safeguard in that an award under section 37A is not punitive, carries no criminal sanctions and is reduced by any compensation payable for loss of renewal rights. Understandably, the court is reluctant to rely on a simple undertaking from the landlord to occupy.Footnote 194 Nevertheless, it is common for an undertaking to support the landlord's claim because, if clear and definite, it will usually serve to advance the landlord's case.Footnote 195 This is particularly so if it is given by a company with a sound reputation.Footnote 196 The landlord's subjective intention may also be evidenced by, for example, the minutes of a board or partnership meeting, an affidavit of a director or the obtaining of quotations for equipment to be used on regaining possession.Footnote 197 The court will consider any outward sign that the landlord's expressed intentions are authentic.Footnote 198 In Skeet v Powell-Sneddon,Footnote 199 the evidence of the landlord that she wanted to operate a hotel business with her husband and to give employment to her daughter (who had studied hotel management) proved convincing. This was so even though no partnership agreement had been entered and no application had been made for a liquor licence. Similarly, in Pelosi v Bourne,Footnote 200 the landlord sought to expand his successful business into the tenant's existing premises. The facts that the landlord's present accommodation was cramped and that the business was financially strong persuaded the court that the intention to occupy was settled. It was not necessary that the landlord should detail the proposed layout of the extended premises.
The fixity of the landlord's intentions may, however, be challenged in circumstances where alternative accommodation is available for the landlord's occupation. If the landlord seeks to preserve both options until the conclusion of the hearing, this may have a deleterious effect on the landlord's opposition.Footnote 201 Similarly, while the landlord's business proposals can be modified during the intervening period between the service of the renewal documentation and the hearing,Footnote 202 it appears that the opposition will be damaged if alternative modes of intended business are proposed.Footnote 203 As Ward L.J. noted in Zarvos v Pradhan, the landlord could not be said to have a firm and settled intention when, although he wanted to operate a new upscale dining restaurant, he asserted that he would, “make do with the old taverna”.Footnote 204
In addition to testing the landlord's subjective intentions, the court must also be persuaded that the landlord has the ability to progress those genuine intentions if allowed to recover possession. While in principle the same forensic exercise is adopted across both ground (f) and ground (g), as regards redevelopment the landlord's task is, understandably, more difficult. It is not normally appropriate to test the reasonable practicality of the landlord's proposals under ground (g) by reference to detailed financial plans or planning permission. As Laws L.J. emphasised in Gatwick Parking Service Ltd. v Sargent, the hurdle to be surmounted by the landlord, “is by no means a high one … He has to show that there is a real, not merely a fanciful, chance”.Footnote 205 Financial considerations may, however, assume importance when the premises need extensive refitting before they can be used for the landlord's purposes.Footnote 206 A detailed examination of the financial viability of the landlord's proposals might then be appropriate and emerge as a key factor in determining whether the intention is realistic.Footnote 207 Ground (g) is, moreover, concerned only with the reality of the landlord's intention of establishing the proposed business. The probability of its eventual success is not a relevant factor. Accordingly, in Cox v Binfied, the landlord's opposition succeeded even though the business plans were ill-thought out and likely to fail.Footnote 208 Similarly, in Dolgellau Golf Club v Hett,Footnote 209 the landlord's opposition prevailed even though its plans were incomplete and the business venture likely to flounder in the longer term. As Auld L.J. acknowledged, “The Court is not there to police a landlord's entitlement to recover possession of his own property by examining the financial wisdom of his genuinely held plans for it”.Footnote 210
The landlord may, however, experience difficulties where occupation is sought for purposes that are prohibited under a head lease. This was demonstrated in Wates Estate Agency Services Ltd. v Bartleys Ltd.Footnote 211 where such a prohibition disentitled the intermediate landlord from relying on ground (g). In order to succeed, the competent landlord should secure the relaxation of the user covenant before the hearing date. The issue of planning permission may also become relevant when the landlord's intentions involve a proposed change of use. While there is no obligation on the landlord to obtain any permissions or consents prior to the hearing,Footnote 212 the landlord should be in a position to demonstrate a reasonable prospect that they will be obtained.Footnote 213 From this perspective the issue addressed is whether a reasonable man would expect permission to be granted.Footnote 214 If there is no reasonable prospect of obtaining such permission, say when the landlord had previously been refused permission because a proposed construction would entail a loss of recreational facilities,Footnote 215 then the landlord's opposition must fail.Footnote 216 As the underlying policy of section 30(1)(g) is that the landlord must prove its opposition, and due to the commercially catastrophic consequences that may follow for the tenant, few could argue that the landlord should not in all cases secure necessary planning permission for a proposed change of use.
V. Conclusion
Although the workings of the Part II machinery have been the subject of periodic review, the reforms that have followed have been piecemeal and remarkably modest. Indeed, some 60 years have now elapsed since the last comprehensive and systematic review of the statutory regulation of business tenancies. Attention has, therefore, focused primarily upon functional detail rather than any re-evaluation of underlying principle. This failure to embrace wider issues serves only to perpetuate ill-considered provisions, outmoded notions and dated policy responses. Indeed, the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 offers the latest illustration of this tendency. Although it marked the culmination of 20 years deliberation by the Law Reform Agencies, the changes promoted amounted to little more than a fine-tuning exercise. Such substantive reforms that have occurred, moreover, tend to favour the landlord. Such pro-landlord developments include the right to apply for an interim rent during the continuation tenancy, the ability to contract out of the renewal provisions and the right of the lessor to commence Part II proceedings. It is significant that there has been no comparable improvement of the tenant's lot as to the calculation of compensation and no attempt whatsoever to restrict the right of the landlord to override the renewal claims of its tenant.
The continued existence of section 30(1)(g) compromises the integrity of the Part II machinery. It disturbs the balance otherwise maintained between the management interests of the landlord, the survival of the tenant's business and the wider public interest. In conjunction with the existing compensation provisions, ground (g) also facilitates the deprivation of goodwill without financial recompense and, thereby, constitutes a violation of the tenant's human rights. The reform of section 30(1)(g) is long overdue. No one could argue cogently that it be allowed to continue in its present and infelicitously drafted form. Some might suggest that the problems associated with ground (g) could be overcome by increasing the evidential burden on landlords, imposing further safeguards for tenants and re-tooling the compensation machinery to cater for the loss of goodwill. This line of reasoning is, of course, rooted in the belief that ground (g) enjoys some contemporary legitimacy. Others, including the present author, would argue for its repeal. Section 30(1)(g) was imported from a very different regulatory regime under which financial compensation was the primary right and geared to actual gains and losses. Such reality-based issues are, of course, overlooked within the 1954 compensation provisions. Ground (g) was valued as an escape route for landlords from the renewal machinery, which was thought to be necessary at a time when it was not possible directly to contract out of the renewal scheme. This historical imperative necessarily disappeared with the advent of contracting out, which has rendered the renewal scheme optional at the behest of the parties.Footnote 217 As the degree of abrogation of the landlord's rights is now a matter for private bargain, and if the parties elect for the statutory regulation of their relationship, the traditional protection of common law rights is both unwarranted and unnecessary. Section 30(1)(g) bestows no discernible public benefit and, by blatantly offending notions of justice and fairness, sponsors the very mischief at which the legislation was directed. In this much-changed legal landscape, there is surely no rational policy justification for the continued existence of this ground of opposition. It is regrettable that political lethargy and the hackneyed rhetoric of the law reform agencies obscure the need for substantive reform and continue to hinder the development of an alternative strategy for the future regulation of business tenancies.
