Competent Landlord- Frozen Value Ltd v Heron Ltd

Today's post concerns the definition of the 'competent Landlord' in relation to business Lease renewals under part II of the 1954 Landlord and Tenant Act (LTA). It is therefore of relevance to both commercial Landlords and Tenants who are seeking either to stop or renew their Lease.

First- some context. Business Tenants have security of tenure under the LTA. This means that their Lease will continue (once it has come to an end) on the same terms and at the same rent as before. The Landlord can only oppose the renewal by using one of the prescribed methods under the act. The Landlord can only oppose the Tenant's application by asserting one or more of the grounds in s30 (1) LTA. The grounds are:

• The Tenant's failure to repair the property (a)
• The Tenant's persistent failure to pay rent (b)
• Substantial breach of other obligations (c)
• Suitable alternative accommodation is available for the Tenant (d)
• On a sub letting of part, the Landlord requires the whole of the premises (e)
• The Landlord intends to demolish, reconstruct or carry out a substantial work of construction to the holding (f)
• The Landlord intends to occupy the premises (g)

The case of Frozen Value Ltd v Heron Ltd (Frozen Value) 2012 concerned ground G- the Landlord's intention to occupy the premises for the purpose of a business or as his residence. In order to rely on ground G, the Landlord must have owned the property for at least five years. This is to prevent a buyer purchasing the Landlord's interest, before the expiry of the Lease, and seeking to rely on ground G. In Frozen Value the Landlord was granted a new headlease throughout the five year period. However, the Landlord was not the competent Landlord throughout the five year period. As such, the Landlord in this case could not rely on ground G.

What does this mean for Landlords? If a Landlord seeks to rely on ground G under s30 LTA then they must have been the competent Landlord at all times throughout the five year period. Successive periods under separate Leases can be aggregated for the purpose of calculating the five year rule. However, the Landlord must have been the competent Landlord throughout the five year period. This is important as ground G is a mandatory ground- if the Landlord can successfully establish it then the court must refuse to grant the Tenant a new tenancy (the Tenant will then be able to claim compensation for disturbance. This is because it is not the Tenant's fault that the Lease will not be renewed). As stated previously, many shopping centre and high street Leases are due to expire by 2015. The above should be noted by retail (and indeed all) Landlords who do not want the current Tenant to stay in their property i.e. because they want to add variety in the shopping centre or introduce a new and more reputable Tenant in the property.

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