Under the Landlord and Tenant Act 1954, there are limited grounds on which a commercial landlord can remove its tenant if the tenant has a protected lease. The tenant is entitled to a renewal of its existing lease, and the terms of this existing lease will be the starting point for the new lease.
This is unless the landlord can prove one of the grounds for refusing a renewal.
One of these grounds is 'Ground G', where the landlord intends to occupy the premises for its own business.
Ground (g) of the Landlord and Tenant Act 1954 (LTA 1954) states that the landlord can oppose a lease renewal if:
"... on the termination of the current tenancy, the landlord intends to occupy the holding for the purposes or partly for the purposes of a business to be carried on by him therein or as his residence.
There are three aspects to this Ground (g):
- Who will actually occupy the premises.
- The extent of the occupation.
- The purpose of a business or residence.
Does the landlord have to intend to occupy?
In most cases, the landlord will intend to occupy themselves, but personal occupation is not actually necessary. A landlord can have an agent or manager of its business in occupation, which would suffice for the purposes of the Ground (g). If there are joint landlords, all landlords must require the premises for their own occupation.
What if the landlord is an individual but wants to put his company into occupation?
In this instance, if the landlord is an individual but has a controlling interest in a company, then the company can occupy the property as if it were the landlord.
Who can occupy if the landlord is a company?
If the landlord is a company, then references to the company or a person with a controlling interest in the company will be sufficient.
However, there are strict rules about this test. Landlords can only use this option if the person in control has owned their controlling stake for more than five years before the tenancy ends. It also won't work if the tenancy gained protected status under the 1954 Act after they bought their controlling stake.
What about if my landlord is a member of a group of companies?
Where the landlord is a company and a member of a group of companies, then references to the landlords' occupation are construed as references to the occupation of any company within the same group.
What does occupation mean in this context?
This is given the ordinary meaning and generally requires a physical presence and control of the premises.
Must the landlord intend to occupy for a business?
Yes. Business means a trade profession or employment.
What if my landlord intends to occupy it for residential purposes?
Whilst it is more common for a landlord to claim it intends to occupy for business purposes a landlord can oppose a renewal using Ground (g) if it intends to live in the premises. This is a more onerous requirement if a landlord intends to live in the premises because they will have to show that they intend to occupy the entire premises as opposed to only part if they were occupying for the purposes of a business.
A landlord cannot rely on Ground (g) if it has only owned its interest in the premises for less than five years.
The five-year period is calculated from the date of termination specified in the section 25 notice or the section 26 request for a new tenancy.
Special rules define the landlord's interest, and the landlord has to be competent for these purposes.
How can a landlord successfully rely on Ground (g)?
The landlord must be able to prove that it has a 'firm and settled' intention to occupy the property themselves.
There must also be a reasonable prospect of achieving the intention, such as having appropriate funding. For example, if the property is being run as a restaurant and the landlord intends to run it as an art gallery, and that will necessitate huge refurbishment works, the landlord needs to be able to show it can pay for and fund those works.
The landlord must also intend to occupy the premises for more than a short period of time. This is to prevent landlords from' occupying' for only a few months in order to satisfy Ground (g) and remove the tenant.
When must a landlord's intention be proved?
The landlord must satisfy the court that, as of the date of the final hearing, it has a firm and settled intention to occupy.
Must the landlord have owned the property to rely on this Ground for a certain period?
Yes. A landlord must have owned the premises for at least 5 years to be able to serve a notice relying on Ground (g).
If a landlord succeeds on Ground (g), is the tenant due any compensation?
Yes. This is a compensatable ground, so if a landlord succeeds and a tenant has to move out, then the tenant will be entitled to compensation. The amount depends on how long the tenant has occupied the property, but if the tenant has occupied for business purposes for less than 14 years, it will be an amount equal to 1 x the Rateable value of the property, and if it is in excess of 14 years, then it will be 2 x RV.
Tenants, therefore, have a few opportunities where a landlord's 'Ground (g)' case may fail.
The recent case of MVL Properties (2017) Ltd v The Leadmill Ltd [2025] EWHC 349 provided helpful clarity on how a tenant can fight Ground (g) and showed how it can play out in practice.
The tenant operated a music venue and nightclub in Leeds from a derelict Victorian flour mill called 'The Leadmill'. In 2003, the venue was leased to The Leadmill Ltd for 20 years starting on 25 March 2003. On 3 November 2017, MVL bought the property's freehold. Near the end of the lease term, the landlord served notice on the tenant, stating that it wished to terminate the tenancy and occupy the property itself relying on Ground G, after carrying out refurbishment of the property.
The judgment provided a useful recap of the two tests that a landlord must satisfy to successfully rely on Ground (g).
In relation to the subjective test, a landlord had to demonstrate, as at the date of the hearing, the relevant firm and settled intention to occupy the property on termination of the tenancy for the purposes of carrying out a business. They also had to intend to act within a reasonable time after the end of the current tenancy.
For the objective test, they had to demonstrate a reasonable prospect of achieving the fulfilment of that intention and that it was more than just a fanciful chance.
In relation to the subjective element of the test, the court was satisfied because the sole director of the landlord company offered an undertaking to the court that they were going to occupy. The undertaking was supported by other evidence, including the landlord's history of operating numerous music venues in different towns in the UK since 2013, the landlord committing very substantial sums of money to the project, and having registered a trademark "Electric Sheffield".
The judge also thought that the landlord had proved the objective element of the test.
During his evidence, Mr Mills, who was the sole director of the tenant company, indicated that if they were not given a new tenancy, all the fixtures and fittings would be removed from the property to reduce it to its original state of dereliction. The judge asked about the logic of incurring the cost to do that and was told that they thought it was worthwhile because they could dispose of the dismantled dance floor as souvenir mementos. The judge accepted that this was a probable scenario.
The tenant also tried to argue that the landlord could not realise an intention to carry on the business at the property on the termination of the current tenancy because it wanted to carry out an extensive program of works before they took up occupation.
This was a point that was considered in detail by the trial judge, but he disagreed and found that occupying the property for the purpose of rendering the property fit for the conduct of an intended business by refurbishing or fitting out was an occupation for the purposes of a business.
The judge did not think that the tenant could return the property to a derelict state and then rely on that to argue that due to the extent of work required, it would then be impossible for the landlord to occupy for the purposes of a business within a reasonable time.
The judge was also satisfied that the landlord had a realistic prospect of completing the works to enable it to operate the music venue because it could clearly afford the anticipated expenditure.
The case also included an interesting and novel argument about whether Ground (g) was incompatible with the European Convention on Human Rights, in particular paragraph one, which provides that :
"a natural legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions accepting the public interest and subject to conditions provided for by law and by the general principles of international law."
The tenant sought to argue that the 1954 Act has to be read and given effect in a way that is compatible with Article One and asked the court to consider whether the goodwill that the tenant had built up from operating at the premises constituted a possession for the purposes of article one and, therefore, whether the tenant was going to be deprived of the goodwill if they had to move out.
Interestingly, the court did accept that goodwill could constitute a possession, but it was not accepted that the tenant had proved goodwill in the present case.
The court said that even if they had found goodwill existed, the tenant would not have been deprived of that possession because Article One does not confer or guarantee the content of any right property, but merely the peaceful enjoyment possession is already owned by a person.
Some important points to take away from the case are as follows:
- A landlord can indicate the necessary intention to occupy by giving an undertaking to the court. Clear evidence of a financial ability to run a business will also demonstrate the objective intention.
- Commercial tenants will struggle to argue that the period between a landlord renovating its property and starting the business is unreasonable, particularly if the delay is partly due to the tenant's own actions.
- European Convention on Human Rights arguments play a role in possession claims under the 1954 Act.
This information is for guidance purposes only and does not constitute legal advice. We recommend you seek legal advice before acting on any information given.
