Applications for Fresh Commercial Tenancies - Court of Appeal Guidance

How does one decide whether a commercial tenant 'ought not' to be granted a new tenancy under Part II of the Landlord and Tenant Act 1954? The Court of Appeal addressed that and other important issues in a guideline case.

The tenant of two newsagents' shops issued notices under Section 26 of the Act, seeking new tenancies. The landlord, however, served counter-notices under Section 30, asserting that the tenant had breached its obligations under the lease and that there were good reasons why new tenancies ought not to be granted.

Following a hearing, a judge found that the premises were in a state of substantial disrepair when the landlord issued the counter-notices and that the tenant had persistently delayed paying rent. In nevertheless ordering new tenancies to be granted, he found that the disrepair had been remedied by the date of the hearing and that the delays in paying rent were minor and would not recur.

In dismissing the landlord's second appeal against that outcome, the Court found that the judge was not confined to considering the state of disrepair of the premises as at the date of the hearing, without regard to the tenant's past behaviour. In deciding whether delays in paying rent were persistent, he was plainly entitled to survey the tenant's payment record throughout the course of the tenancies.

In considering whether the tenant ought not to be granted new tenancies, the judge was entitled to have regard to all the circumstances, including his assessment that the landlord was a 'hands off' commercial landlord and the tenant's potential loss of livelihood if it were not granted fresh leases. The prospects of the tenant complying with its lease obligations in future were also relevant.

There was no evidence before the judge that the relationship between landlord and tenant had broken down and, taken in the round, he was entitled to conclude that the tenant's conduct was not serious enough to deny the grant of new tenancies. He had adopted the correct approach and there were no grounds for disturbing the value judgment he had reached.