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Franses v Cavendish - the sequel
- Aug 24, 2021
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In 2018 the Supreme Court shocked the commercial property world when it ruled in Franses v The Cavendish Hotel that a landlord must - for the purposes of terminating a tenancy under Section 30(1)(f) of the Landlord and Tenant Act 1954 - demonstrate that, if a tenant were to leave voluntarily, it would still carry out its proposed scheme of redevelopment.
Now that the Court has determined that a new lease should be granted to the Cavendish Hotel, the parties have found themselves in Court again. This time they were asking the Court to decide what the terms of the renewal lease should be. Judgment was handed down in "the sequel" on 18 June 2021.
The parties failed to agree on a number of aspects of the renewal lease. However, for the purposes of this blog, we shall just focus on rent. Unlike the decision in 2018, this iteration of Franses v Cavendish did not create any new law. However, it is illuminating in that it demonstrates the Court's approach to establishing renewal terms in relation to Central London retail property, when the review date fell during the Covid-19 lockdown.
The landlord's expert witness put forward a rent of £174,750 per annum. The tenant's expert suggested £96,500 per annum. The evidence of both experts was rigorously examined, with the judge concluding as follows: “both counsel successfully undermined the evidence of the other side’s expert... However, I emphasise that these criticisms only go so far in the circumstances of this case. This is for a number of reasons. The first is that both experts in their first reports had to struggle with how to address a Covid-dominated rent assessment when there were no comparables. Neither approach was successful but I recognise the difficulty the experts were in.”
Ultimately, the judge set the rent at £102,000 per annum, much closer to the tenant's valuation. By way of context, prior to the renewal, the rent had been £220,000 per annum (albeit this had been set in 2011 and following the rent review provisions in the previous lease, which required certain covenants to be ignored).
As highlighted by the judge's assessment of the experts' evidence, Covid continues to create uncertainty in the market. Whilst each lease renewal will be very fact specific, landlords and tenants may wish to refer the detail of this case, to see which arguments the judge found attractive and which were dismissed out of hand.
both experts in their first reports had to struggle with how to address a Covid-dominated rent assessment when there were no comparables. Neither approach was successful but I recognise the difficulty the experts were in.