When faced with a Section 25 notice opposing renewal, a tenant has a choice as to whether to accept the notice and the termination of the tenancy or challenge that opposition and issue court proceedings. Ros Monk, partner in our land and property dispute resolution team, looks at the legal position and the options available to tenants.
The decision in McDonald’s Restaurants Limited v Shirayama Shokusan Company Limited [2024] highlighted that a tenant can use the Landlord and Tenant Act 1954 to obtain compensation if the landlord has obtained an order for termination of the tenancy by way of misrepresentation or the concealment of material facts.
However, what can a tenant do if it simply accepts the notice and vacates a property, relying on an opposed Section 25 notice and then the landlord does not then carry out that intention of either redeveloping or occupying the property itself?
Inclusive Technology v Williamson [2009]
Surprisingly, there is only one reported case on this issue – Inclusive Technology v Williamson [2009] EWCA and the case is not well known.
Here, the landlord served a Section 25 notice opposing renewal of the lease on the basis of ground (f) redevelopment. The notice sought to terminate the tenancy on 31 January 2007.
Prior to serving the notice the landlord had told the tenant that it intended to redevelop the property and in the covering letter serving the notice the landlord referred to those previous exchanges and said it was “… necessary to obtain vacant possession to carry out the intended work”.
The tenant accepted the notice. The tenant signed a lease for alternative premises, took the statutory compensation and vacated the property in mid-December 2006.
However, it later turned out that in fact, by September 2006, the landlord had decided that it would delay the redevelopment works until an unspecified date and then re-marked the property.
When the tenant found out that the landlord had not commenced redevelopment works to the property, it issued court proceedings.
The tenant in the McDonalds case referred to above relied upon Section 37A (1) but in this instance where there is no court order, the relevant provision is Section 37A (2) of the Landlord and Tenant Act 1954.
This provides that:
(2) Where–
(a) the tenant has quit the holding–
(i) after making but withdrawing an application under section 24(1) of this Act; or
(ii) without making such an application; and
(b) it is made to appear to the court that he did so by reason of misrepresentation or the concealment of material facts.
The court may order the landlord to pay to the tenant such sum as appears sufficient as compensation for damage or loss sustained by the tenant as the result of quitting the holding.
The tenant claimed compensation on the basis that it had quit the premises by reason of misrepresentation or concealment of material facts.
In response to the proceedings, the landlord argued that when it has served the notice in June 2006 it had intended to undertake the work as stated in the notice. However, that intention had later changed.
What did the Court decide?
At first instance the Court decided that the landlord had not misrepresented its intention at the time of service of the Section 25 notice and crucially that there was no obligation on the landlord to update the tenant if that intention changed.
The tenant appealed to the Court of Appeal and the Court of Appeal found in favour of the tenant.
The Court of Appeal decided that the representations, being the Section 25 notice, the conversations and covering letter, made by the landlord were special representation, made as part of a statutory process, and should be treated as a continuing representation.
That meant that if the representation changed then the landlord was obliged to inform the tenant. If the landlord did not inform the tenant of the change, then this would be regarded as concealment.
Here, therefore the landlord should have updated the tenant as to its changed intention.
However, the Court of Appeal specifically said that not every case in which a hostile Section 25 notice is served will give rise to a continuing representation. It will be a matter of fact in each case.
In this instance, the Court awarded the tenant damages to reflect the difference in rent between its new premises and the rent payable for the property.
Takeaway for tenants
This is a positive judgment for tenants, but you should bear in mind that each case will be considered on its facts. The court will look at the surrounding discussions and information provided, and statements made to the tenant, but the court will keep at the forefront of its mind that the 1954 Act puts the landlord is in a special position.
If you receive a hostile Section 25 notice, ask the landlord for as much detail as possible about its plans. Try to get the landlord to provide as much detail as possible.
This is something we would advise in any event, whether or not your immediate reaction is not to challenge the notice. Take legal advice as quickly as possible to put you in the strongest position.
If you would like to speak with one of our lawyers, then please get in touch with our land & property dispute resolution team on 01772 258321.