How and when does ground (d) arise?
It arises when a landlord of business premises wishes to oppose the grant of a new lease on the basis that instead it is prepared to offer the tenant alternative accommodation. For this to work, the court must be satisfied, under section 30(1)(d) of the Landlord and Tenant Act 1954:
“… that the landlord has offered and is willing to provide or secure the provision of alternative accommodation for the tenant, that the terms on which the alternative accommodation is available are reasonable having regard to the terms of the current tenancy and to all other relevant circumstances, and that the accommodation and the time at which it will be available are suitable for the tenant’s requirements (including the requirement to preserve goodwill) having regard to the nature and class of his business and to the situation and extent of, and facilities afforded by the holding”.
What are the advantages to a landlord of using ground (d)?
There are four principal advantages:
First, there is no discretionary element in the court’s decision. If the landlord makes out the ground, the court has to grant possession on that basis. If the landlord can prove that suitable alternative accommodation will be available at the relevant time, the court must refuse to grant the tenant a new lease of the existing premises.
Secondly, a landlord who makes a good offer of alternative accommodation can be relatively confident that it will succeed in its ground of resisting a new tenancy: this may explain why there are only a handful of leading (reported) decisions in this area.
Thirdly, the landlord has all the time until the hearing to perfect the terms of the alternative accommodation.
Fourthly, and perhaps most significantly, no statutory compensation is payable: this is because in one sense the tenancy continues, just somewhere else.
When should the landlord make its offer of alternative accommodation?
The literal wording of ground (d) seems to suggest a need for the landlord to have made the offer to the tenant before the landlord relies on ground (d), so before its section 25 notice or counter-notice.
However, in his Solomonic judgment in M Chaplin Ltd v Regent Capital Holdings Ltd [1994] 1 EGLR 249, Judge Aron Owen treated the latest time as after service of the relevant notices but (necessarily) before the nature and terms of the alternative accommodation are set out in pleadings (statements of case). In that case an offer made in a covering letter with the section 25 notice was regarded as certainly valid.
However, the date at which the reasonableness of the offer is judged – and in theory statements of case can be amended – is the date of the hearing: see Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1958] EGD 92.
This gives the landlord time to refine its offer to meet objections on suitability raised by the tenant right up until quite an advanced stage of the proceedings, although there may well be costs consequences if a late amendment could really have been made sooner.
What makes the terms of an offer of alternative accommodation reasonable or unreasonable?
It is common for landlords using ground (d) to set out in a letter, or in its statement of case, the terms of the proposed new tenancy, including, of course, its location, size and the rent, duration and commencement date of the lease, rent-free period, etc – the type of matters usually covered in heads of terms.
As ever, reasonableness is an issue for the court to decide. Generally, though, a departure from the terms of the existing lease which is disadvantageous to the tenant in relative terms and/or a location which is or might be detrimental to the operation of its business are the sorts of terms that are likely to be castigated as unreasonable.
What makes the terms of an offer of alternative accommodation suitable or unsuitable?
The alternative accommodation needs also to be “suitable for the tenant’s requirements (including the requirement to preserve goodwill) having regard to the nature and class of his business and to the situation and extent of, and facilities afforded by, the holding”.
It is important to stress that the court decides suitability: a tenant who regards the alternative accommodation as unsuitable will need to persuade the court that its concerns are justified objectively.
Again, though, in judging suitability, as well as in judging reasonableness, as a matter of practicality the starting point will be the terms of the existing tenancy. That will necessarily be the yardstick against which suitability is judged, because a tenant will not be able to use the occasion of the landlord’s reliance on ground (d) to force an “upgrade”.
It is also necessary that the accommodation is available to the tenant at a time which is suitable for the tenant’s requirements (including the requirement to preserve goodwill). This will usually be three months after the expiry of the current term as that is when the tenant will be expected to move if the landlord succeeds in its reliance on ground (d).
In theory, therefore, alternative accommodation might be such as will become available as at the date of the offer, if the court finds in favour of the landlord on ground (d): it could, in other words, be premises which the landlord has yet to acquire, but has the ability to acquire if necessary. In practice this will require the landlord to show that it is in genuine and serious negotiations to acquire those premises and that it has the financial ability to do so.
The landlord must therefore, at the very least, be willing to provide the specific alternative accommodation as at the date of the notice relying on ground (d) and able to provide it by the time that the tenant will need it: both of these aspects of the landlord’s intention and ability will need to be proven as at the date of the hearing.
Who bears the burden of proving that the alternative accommodation is reasonable and suitable?
The landlord.
Is it possible for a tenant to say that an offer of alternative accommodation is not reasonable because the landlord has not offered it removal expenses?
It might be. The position is arguable on the wording of ground (d). The better view is probably that such an offer will assist the landlord in establishing overall reasonableness.
Can the landlord combine reliance on ground (d) with reliance on other grounds such as (f) (redevelopment) or (g) (own use)?
Yes, but then the landlord should expect the tenant to try to steer the court’s finding to those grounds, where statutory compensation is payable.
Checklist
- How and when does ground (d) arise?
- What are the advantages to a landlord of using ground (d)?
- When should the landlord make its offer of alternative accommodation?
- What makes the terms of an offer of alternative accommodation reasonable or unreasonable?
- What makes the terms of an offer of alternative accommodation suitable or unsuitable?
- Who bears the burden of proving that the alternative accommodation is reasonable and suitable?
- Is it possible for a tenant to say that an offer of alternative accommodation is not reasonable because the landlord has not offered to pay removal expenses?
- Can the landlord combine reliance on ground (d) with reliance on other grounds such as (f) (redevelopment) or (g) (own use)?
