A recent appeal to the High Court in the case of Royal Borough of Kensington & Chelsea v Mellcraft Ltd has highlighted what ‘business occupation’ means under the Landlord and Tenant Act.
Facts
This case was an appeal by the Royal Borough of Kensington & Chelsea (“the local authority”), addressing two issues relating to when a person will be in occupation for business purposes under the Landlord and Tenant Act 1954 (“the LTA”).
The local authority was the freeholder of the building and leased a second-floor flat, from where the sole director of Mellcraft Limited (“Mellcraft”) was said to live and conduct business. The local authority served a notice to terminate the tenancy of the flat pursuant to Section 25 of the LTA, to oppose the grant of a new lease under Section 30(1)(g), relating to the landlord’s intention to occupy the holding for business purposes. Mellcraft subsequently issued proceedings and applied for a new tenancy, pursuant to the provisions of Part II of the LTA.
On Appeal to the High Court
Two of the three grounds of appeal cited by the local authority in the High Court were as follows:
- the local authority argued the director of Mellcraft was not in business occupation of the flat at the end of the contractual term for the purposes of s23(1);
- the local authority argued it could oppose the newly requested lease as it intended to occupy the flat for business purposes as under s30(1)(g), its purpose of business being to let the flat as temporary accommodation in compliance with its housing duty as a local authority under the Housing Act 1985.
The appeal was dismissed by Edwin Johnson J who found the trial judge to have correctly referred to Lord Denning MR’s judgment in Cheryl Investments Ltd v Saldanha [1978] and concluded the director of Mellcraft’s occupation of the flat was for business purposes, notwithstanding it was also his family home. Furthermore, Edwin Johnson J found that as the correct test was applied, there was not good enough reason to interfere with this judgment, despite the trial judge acknowledging the director’s evidence in support of his claim was “somewhat unsatisfactory”.
On the second issue, where the local authority argued s30(1)(g) was satisfied, the trial judge at first instance found the local authority did not satisfy this ground. On appeal, the local authority argued the tenancies would not be secure tenancies under s79 and Schedule 1 paragraph 4 of the Housing Act 1985. They also argued they would be short term tenancies, being 6 to 12 months in length, pursuant to s189B(2) of the Housing Act 1996.
It is worth noting that the local authority failed to produce a sample tenancy. Edwin Johnson J upheld the decision of the trial judge and referred to Grayism Holdings Ltd v P&O Property Holdings Ltd [1996] where Lord Nicholls said the issue is one of control, and “the answer depends upon the facts of the particular case… the degree of presence and exclusion required to constitute occupation… and the rights enjoyed or exercised by the persons in question.” Lord Nicholls went on to say that “Where the permission takes the form of the grant of a tenancy, there will usually be little difficulty. Ordinarily the tenant, entitled to exclusive possession of the offices or factory or shop, will be the occupier, not the landlord.” As the local authority intended to grant tenancies, it was clear it would not be the occupier of the premises. However, had the local authority sought to grant licences for accommodation of the property for homeless persons, it may have meant s30(1)(g) was satisfied with the local authority maintaining significant control of the premises. This issue is touched upon in Grayism, where Lord Nicholls states “Where the permission takes the form of a license there will often be more room for debate. The rights granted by a licence tend to be less extensive than those comprised in a tenancy… therefore, a licensor may have an easier task in establishing that he still occupies… The Act itself draws a distinction between tenants and licensees, protecting the former but not the latter.”
Summary
It is clear the second ground of appeal is the more subjective, while the first ground is easier to prove for the occupier. Had the local authority intended to grant licences rather than tenancies for accommodating the homeless persons, perhaps s30(1)(g) would have been satisfied due to the local authority having sufficient control.
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