Ground (f) Breaking News

• 8 April 2025
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The recent case of Spirit Pub Company (Managed) Limited v Pridewell Properties (London) Ltd involved a landlord seeking to remove a tenant from a long-established pub with residential upper parts under Ground (f) to facilitate a mixed-use redevelopment. The Defendant’s failure to show a real prospect of obtaining the necessary funding was sufficient to defeat the landlord’s opposition under Ground (f). 

Key Issues and Arguments

The court had to determine whether the Defendant had established Ground (f) by demonstrating:

1. That the proposed works could not reasonably be carried out without obtaining possession of the premises.
2. That the Defendant had a firm and settled intention to carry out the redevelopment. 
3. That the Defendant had a real prospect of overcoming the relevant hurdles (planning permission, restrictive covenant, and funding) and commencing the redevelopment within a reasonably short time of the termination of the current tenancy. 

Court’s Analysis and Decision

1. Works Requiring Possession

• The court found that the Defendant could not carry out the proposed works without obtaining possession of the premises. 
• The Defendant’s redevelopment works involved substantial structural work that would permanently exclude the Claimant from significant parts of the premises, resulting in a breach of the covenant of quiet enjoyment and a derogation from the grant of the tenancy. 

2. Firm and Settled Intention

• The court was satisfied that the Defendant had a firm and settled intention to carry out the redevelopment. 
• The Defendant had sought pre-application advice twice before it decided to proceed with the development in July 2024. The court accepted the Defendant’s evidence that the premises were purchased as a development property and that the decision to proceed with the redevelopment was not conditional on the outcome of the litigation. 

Real Prospect of Overcoming Hurdles

The court considered the four main hurdles: planning permission, the restrictive covenant, funding, and timing. 

(a) Planning Permission

• The court found that the Defendant had a real prospect of obtaining planning permission. 
• The court acknowledged the tension between the local authority’s policies on protecting public houses and the proposed planning application. 
• However, the court found the Defendant had a real prospect of obtaining planning permission, and focused on the fact that the Defendant had instructed acoustic consultants and that acoustic design measures could mitigate the risks associated with noise complaints from new residential units. 
   

(b) Restrictive Covenant

• The court found the Defendant could overcome the restrictive covenant, either through an application to the Upper Tribunal or by obtaining restrictive covenant insurance. Any compensation payable would likely be modest and would not derail the development.

(c) Funding

• The court found that the Defendant had not demonstrated a real prospect of obtaining the necessary funding for the redevelopment. 
• The Defendant’s reliance on an indicative term sheet from Punjab National Bank (International) Limited was insufficient, as it was not legally binding, and the Defendant had not provided evidence of the directors/shareholders’ ability to provide personal guarantees. 

(d) Timing

• Ground (f) requires that the works relied on to make out the ground must be undertaken “on the determination of the current tenancy”. Case law allows for a grace period after lease expiry, although there is limited guidance on how long that grace period can be. 
• In this case, the landlord’s work was not expected to begin until 10–14 months after the tenant’s lease ended. Here, the court found that the Defendant had a reasonable explanation for the delay, as the Claimant had refused the Defendant access to the premises to carry out an acoustic survey and intrusive investigations.

Key Takeaways 

This case highlights the importance of financial viability in establishing Ground (f) claims. Future landlords should ensure that funding arrangements are well-documented and credible before opposing a lease renewal on redevelopment grounds. 

The case is also important in highlighting several critical aspects of Ground (f) lease disputes:

1. Timing: A landlord may be permitted to delay the development works for an extended period (e.g. 14 months) if they have a reasonable explanation and have taken all necessary steps to advance the project.
2. Tenant co-operation: Courts may be more lenient in assessing a landlord’s delay if the tenant does not reasonably co-operate. In this case, the tenant refused to grant additional access rights beyond their contractual obligations. 
3. Likely future events: Courts may consider the likelihood of future events occurring (e.g. planning permission being granted) when assessing a landlord’s redevelopment prospects.