Key Issue: Business tenancy renewal rights under Landlord and Tenant Act 1954 clarified in Royal Borough of Kensington and Chelsea v Mellcraft Limited case.

Citation: [2024] EWHC 539 (Ch)
Judgment on

Introduction

The case of The Royal Borough of Kensington and Chelsea v Mellcraft Limited is a notable decision from the High Court of Justice related to business tenancies and the conditions for lease renewal under the Landlord and Tenant Act 1954 (“the Act”). This case provides insight into the circumstances under which a tenant is considered to be occupying a premises for business purposes and the requirements a landlord must satisfy to oppose the renewal of a lease under paragraph (g) of Section 30(1) of the Act.

Key Facts

The dispute arose from a lease (“the Lease”) granted for premises known as “the flat,” which had been used by the respondent, Mellcraft Limited, for both residential and alleged business purposes. The appeal addressed two primary issues. The first was whether the respondent had occupied the flat for business purposes at the expiry of the contractual term of the Lease, which would entitle them to a new business tenancy under the Act. The second issue pertained to whether the appellant, The Royal Borough of Kensington and Chelsea, had satisfied the grounds to oppose this renewal as stated in paragraph (g) of Section 30(1) of the Act, which involves the landlord’s intention to occupy the holding for business purposes.

Throughout the judgment, several legal principles and guidelines from established case law were applied:

  1. Business Occupation (Section 23 of the Act): The Act requires that the premises must be occupied for business purposes by the tenant for the tenancy to qualify for renewal rights. The court highlighted the importance of distinguishing between a tenant’s residential occupation and business use that could constitute a business tenancy under the Act, referencing Cheryl Investments Ltd v Saldanha [1978] 1 WLR 1329.

  2. Findings of Fact and Evaluation of Evidence: The court underscored that appellate courts should not interfere with trial judges’ findings of fact, their evaluations, or inferences drawn from facts unless there are compelling reasons, adhering to the approach in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 and further endorsed in Haringey LBC v Ahmed [2017] EWCA Civ 1861.

  3. Intention to Occupy for Business Purposes (Paragraph (g) of Section 30(1)): Paragraph (g) necessitates a landlord to demonstrate a firm and unequivocal intention to occupy the premises for business purposes. The principles derived from Graysim Holdings Ltd v P&O Property Holdings Ltd [1996] highlighted that such intention is invariably connected to the degree of control a landlord retains over the premises.

Outcomes

The court found that:

  1. The respondent, Mellcraft Limited, had occupied the flat in a capacity sufficient to satisfy the requirements of a business tenancy as defined in Section 23(1) of the Act.

  2. The appellant, The Royal Borough of Kensington and Chelsea, had failed to establish its intention to occupy the flat for business purposes as required by paragraph (g) of Section 30(1) of the Act. This failure was predicated on the nature of intended tenancies, which did not confer the necessary control over the flat as would be indicative of occupation by the landlord.

Conclusion

The case demonstrates the nuanced assessment required to determine when a business tenancy under the Landlord and Tenant Act 1954 arises, alongside the critical aspect of business occupation and the landlord’s intention to occupy for business purposes. It clarifies that not only must a tenant’s occupation for business purposes be significant, but also a landlord must retain a degree of control over the premises to successfully argue against lease renewal under Paragraph (g). This judgment serves as a pivotal reference for legal professionals navigating the complexities of lease renewals and the intricacies of business tenancy cases within the framework of UK property law.