UK: Recovering Possession For Redevelopment

Last Updated: 26 October 2010

Security of tenure for business tenants in England and Wales can make it costly and time consuming for landlords to recover possession for redevelopment.

Is it possible for a tenant to defeat the landlord's right to possession by making a summary application to Court before the landlord is ready to redevelop?

A recent English case – Somerfield v Spring – covered this point.

The background facts are that a lease held by Somerfield has expired. They are holding over and seeking a new lease.

However the landlord opposes the grant of a new lease, claiming that it intends to redevelop.

This case has already been before the Courts once before, in June 2009. The landlord had entered administration and – hoping to buy time to work up a redevelopment scheme – the landlord's administrators refused to allow the tenant's lease renewal claim to continue in the normal way. Somerfield felt this would prejudice their claim for a new lease and successfully applied to Court for permission to continue their claim.

Somerfield's next move was to apply for summary judgment. In order to succeed, Somerfield had to prove that the administrators had no realistic possibility of being able to prove their intention to redevelop the premises.

Summary judgment applications are liable to fail wherever there is a genuine dispute of fact, which the Court can decide only by hearing evidence from witnesses at a full trial. This will usually be the case where a landlord claims an intention to redevelop, which is disputed by the tenant. Therefore, successful summary judgment applications in contested lease renewals are not common. If summary judgment is refused, the case will proceed to a full trial in the usual way.

Somerfield's application in this case raised an important point of law.

It is well established that a landlord who opposes lease renewal on redevelopment grounds only has to prove his intentions by evidence at the trial itself and not at any earlier stage.

So the landlord can use the period leading up to the trial to gather evidence on issues such as the likelihood of obtaining planning permission, finance and any pre-lets, if these have not already been obtained and would be critical to the viability of the redevelopment.

However, Somerfield argued that if the landlord could not prove its intention to redevelop at the date of the summary judgment hearing, then summary judgment ought to be granted – which would result in Somerfield being granted a new lease.

The Court rejected this argument.

The Court held that the relevant date when the landlord had to prove its intention was not the date of the summary judgment hearing, but the anticipated trial date. Accordingly, Somerfield's application was refused.

It is not inconceivable that any tenant might apply for summary judgment application for purely tactical reasons, in order to delay the proceedings and put off the date when the premises must be handed back to the landlord.

However now that the timing issue has been determined by the High Court, it will be much more difficult in future for a tenant to apply for summary judgment purely for tactical purposes.

That said, a tenant could still get summary judgment in certain circumstances, for instance if the landlord's plans required planning permission or some other consent which, indisputably, would not be granted.

Equally, a landlord could still get summary judgment application where, for example:

  1. the landlord simply intended to demolish the premises regardless of any subsequent redevelopment scheme, or
  2. the landlord intended to reoccupy the premises for its own business, and there were no factors that would affect the viability of its plans, such as a need for planning permission.

Except in these relatively unusual circumstances, both landlords and tenants should generally avoid making applications for summary judgment in contested lease renewal claims, unless they can genuinely be justified and are of tactical value.

If you are reasonably sure that you will ultimately be successful at Court in a contested lease renewal claim, then the quickest route to a successful judgment will normally be to comply with the Court directions and keep to the original trial date – rather than trying to short-circuit the proceedings by applying for summary judgment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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