8 July 2014 | Comment

Landlord avoids renewal of lease for tenant who breaches access and user covenants

Following Horne v Meredith Properties Ltd v Cox and Another [2014] EWCA Civ 423, the Court of Appeal has made another decision with regards to the grounds on which a landlord can resist the renewal of a business tenancy under s.30(1)(c) of the Landlord and Tenant Act 1954.

In Zoe Youssefi v Joan Mussellwhite [2014] EWCA Civ 885, the Court at first instance considered whether or not the landlord had been justified in relying upon the tenant's breaches of access and user covenants to avoid granting a new business tenancy.

The tenant had leased a “dwelling house shop and premises” from the landlord. The tenant sought to renew the lease under s.26. The landlord opposed the renewal under sections 30 (1) (a), 30 (1) (b) and 30 (1) (c) of the act, on the basis that the tenant had not used the premises in a tenant like manner, that she had been late paying her rent, that she had persistently refused the landlord access to inspect the property and that she had failed open the premises as a shop in direct breach of covenant. It was held that the tenant should not be granted a new tenancy.

The decision was appealed. The Court of Appeal considered whether the correct tests had been applied in terms of the grounds of opposition. As far as the failure to comply with the repairing obligations was concerned under s.30(1) a) the main consideration here was the state of repair of the property. Under 30(1)(b) the issue was the persistent delay in paying the rent. But under 30(1)(c) the focus was broader. The consideration was not just limited to “other substantial breaches” but also “any other reason connected with the tenant’s use or management of the holding”.

The Court of Appeal disagreed with the Court at first instance and did not accept that the tenant had failed to maintain and repair the property and that s.30(1)(a) did not apply. However, in terms of s.30(1)(c) the Court at first instance had been entitled to find that the breach of access alone was substantial and that it would have been prejudicial to the landlord to have to continue with the tenancy in light of the breach. Furthermore, the tenant had failed to use the premises as a shop in direct contravention with the agreement, despite being given 3 years' notice that she was in breach of this covenant. It was held that these substantial breaches could be taken into consideration as to whether the “the tenant ought not to be granted a new tenancy”.

The Court of Appeal acknowledged that the facts of this case “revealed an exceptionally difficult relationship between landlord and tenant that was characterised by two substantial breaches of the appellant’s obligations”. Under the circumstances, the judge was right to apply s.30(1)(c) and that the appellant should not be granted a new tenancy.

It was also held that the landlord did not need to prove that the breach had affected the rental income at the property or that there would be a diminution in value to the reversion of the property.

This decision bolsters the position that landlords can resist lease renewal whereby there has been a substantial breach of the terms of the agreement.

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