Kieran Quinn, Director in the Private Client and Commercial Department of PA Duffy & Co. Solicitors recently acted instructing Wayne Atchison in the Lands Tribunal of NTH Retail Limited v MPS Retail Limited [BT/22&23/2023]
Kieran Quinn, Director in the Private Client and Commercial Department of PA Duffy & Co. Solicitors recently acted (instructing Wayne Atchison in the Lands Tribunal of NTH Retail Limited v MPS Retail Limited [BT/22&23/2023].
The Judgment sets out important legal guidance on the law relating to the termination of a commercial tenancy agreement.
Background:
In this case, the subject premises was a retail store which had a Tenancy for a period of 6 years, which was due to determine on 28 February 2023. The landlord issued a notice to determine in August 2022 as the tenancy was due to end in February 2023. The notice was served on the grounds that the landlord wanted vacant possession on the premises because they wished to trade the premises themselves as a retail store and post office.
The Lands Tribunal solely focused on determining the landlord’s true intentions regarding the property. In this case the landlord relied on article 12(G) which states that ‘The landlord intends that the holding will be occupied for a reasonable period for the purposes, or partly for the purposes, of a business to be carried on in it by him or by a company in which he has a controlling interest’.
Prior to this judgement it was clear how a landlord’s ‘intention’ was to be determined in a way which is fair and just to a tenant hoping to obtain a new tenancy agreement.
Helpfully, the Land Tribunal’s recent judgement provides clear guidance to landlords and tenants on the matter.
Business Tenancies (Northern Ireland) Order 1996:
The Business Tenancies (Northern Ireland) Order 1996 (hereinafter referred to as the ‘BTO’) governs.
Under the BTO When a business tenancy draws to an end, there are two main options for landlords which are as follows:
Serve a notice to determine can be issued by the landlord on the tenant under Article 6.
A request for a new tenancy can be issued by the tenant on the landlord under Article 7.
Article 6 – Landlord’s Notice to Determine / Terminating a Tenancy:
Under Article 6, if a landlord wishes to terminate the tenancy at the end of the term of a lease they must serve the tenant with a Notice to Determine. This notice should be served on the tenant no earlier than 12 months but no later than six months before the lease is due to end.
When doing so the landlord must state the grounds on which they wish to refuse grant the tenant a new tenancy.
The grounds are set out at Article 12 of the BTO which include:
(a) Failure by Tenant to repair and maintain if they are obliged to do so under the lease;
(b)Persistent Delay in paying Rent;
(c)Tenant Substantially breaching the existing covenants / obligations under the lease;
(d)The Landlord is willing to provide alternative suitable accommodation;
(e)Where there is a let of part that possession is required to let or sell to achieve a higher rent or sale as a whole;
(f) Landlord intends to demolish or substantially develop;
(h) The landlord intends to use it for a business to be carried on by it or as his residence
Article 12(G) BTO:
In this case the landlord relied on article 12(G) which states that ‘The landlord intends that the holding will be occupied for a reasonable period for the purposes, or partly for the purposes, of a business to be carried on in it by him or by a company in which he has a controlling interest’.
Prior to this judgement it was clear how a landlord’s ‘intention’ was to be determined in a way which is fair and just to a tenant hoping to obtain a new tenancy agreement.
Helpfully, the Land Tribunal’s recent judgement provides clear guidance to landlords and tenants on the matter.
In this case, the premises were a retails store which had a Tenancy for a period of 6 years which was due to determine on 28 February 2023. The landlord issued a notice to determine in August 2022 as the tenancy was due to end in February 2023. The notice was served on the grounds that the landlord wanted vacant possession on the premises because they wished to trade the premises themselves as a retail store and post office.
Therefore, the Lands Tribunal solely focused on determining the landlord’s true intentions regarding the property.
The Tribunal turned to the case of Cunliffe v Goodman [1950] as Asquith LJ defined intention as a ‘state of affairs which the party, ‘intending’ does more than merely contemplate… It connotes a state of affairs which… he has a reasonable prospect of being able to bring about, by his own act of volition.’
The tribunal accepted that there are two elements to intention:
(1) Subjective element – this relates to the landlord’s state of mind;
(2) Objective element – this relates to the realistic prospects of the intentions being implemented.
The Tribunal also turned to the case of Cox v Clancy [BT/14/2020] which held that that where one element is not clearly established, the Tribunal will not be satisfied that the landlord has the required intention and their opposition to a new tenancy will fail.
The Tribunal first addressed the landlord’s state of mind regarding the premises. In the subject case, the landlord provided ‘100% assurances that she intended to occupy and trade the premises,’ however, there were no board minutes, paperwork nor any documentation from the plaintiff company to confirm this subjective intention. The Tribunal held that this element of the test of intention was not satisfied.
The Tribunal next considered the landlord’s actions to determine realistic prospects of their intentions being followed through. In this case, various objective issues were identified:
At best, the landlord only had a verbal agreement with a wholesaler;
The landlord did not produce a record of any supply agreements;
No documentation was produced by the landlord’s accountants to confirm the company’s financial position;
The landlord did not have a prepared business plan.
As a result, the Tribunal found that the landlord had failed to prove its opposition to a new tenancy as there was no evidence available to suggest that they had a reasonable prospect of carrying out the intention by way of occupying and trading the premises and directed that the parties to negotiate a new lease.
What does this decision mean for landlords where they wish to reoccupy and trade their business premises currently leased?
The law is now clear and unambiguous; there are two elements of intention which must BOTH be established.
Landlords are now aware of the importance of having sufficient ‘proofs’ or evidence available at hearing to support their claims.
This decision demonstrates the high standard of proof which must be met by the landlord.
It provides confirmation that where basic documentation such as financials are unavailable and/or wholesaler agreements cannot be furnished, it is unlikely that the objective element of intention will be satisfied.
What does this decision mean for tenants?
This decision reiterates that BTO 1996 protects business tenants against landlords who do not have sufficient evidence that they wish to trade the premises themselves.
It demonstrates that the Tribunal will not permit opposition or objection to a new tenancy where an intention is premature.
The Tribunal will not prevent a landlord from reoccupying their premises when it is found that their intention is genuine. Where this intention is proven within a relatively short period of time following trial, the Tribunal will take this into consideration when determining the duration of a new tenancy.
that he will oppose a tenancy application by the tenant (and any such notice shall state on which of the grounds the landlord will oppose the application under article 12, as already discussed).
We Are Here to Help!
At P.A. Duffy & Company, we understand that business tenancies are complex and contentious for all parties involved. Our expert commercial solicitors are here to ease the pressures you are faced with and simplify matters by taking control of the situation.
If your business tenancy is due to end or you have a commercial issue and wish to consult with a member of our team please contact us.