1954 Act Consultation – Ground F

Ground F, commonly known as the “redevelopment ground”, allows a landlord to oppose renewal and recover possession where it intends to demolish, reconstruct or carry out substantial works of construction on the holding, and requires vacant possession to do so. 

It is both a mandatory ground of opposition, and a compensation ground. If the landlord successfully establishes Ground F, the court must refuse renewal, and the tenant may be entitled to compensation. 

To rely on Ground F, the landlord must satisfy three requirements:

1. It must have the necessary intention.
2. It must intend to carry out redevelopment works when the tenancy ends.
3. It must be unable to reasonably undertake those works without obtaining possession. 

We explore these requirements below, paying particular attention to the second requirement, where the Law Commission proposes that change might be needed. 

The landlord’s intention is assessed at the date of the court hearing. The intention must be both subjective (genuine, firm and settled) and objective (a reasonable prospect that they will be able to carry out the redevelopment work). In S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] (“Cavendish”), the UK Supreme Court affirmed both of these limbs of intention, and clarified that a landlord’s intention must also be unconditional and not dependent on whether the tenant wishes to continue in occupation. 

Post-Cavendish, there has been some debate about how Ground F operates. Landlords want certainty that they can recover possession for genuine redevelopment. Tenants, however, are likely to want proper scrutiny of the landlord’s intention to ensure the ground is not used for an ulterior motive. 

The Law Commission considers Cavendish consistent with the aims of the 1954 Act and an appropriate balance between landlord and tenant interests. The Law Commission does not, therefore, intend to make any amendments.

For Ground F, “redevelopment” currently covers demolishing or reconstructing the holding or a substantial part of it, and carrying out substantial works of construction.  

The Law Commission identifies two main issues with this scope:

1. Ground F may not cover energy efficiency works required to comply with Part 4 of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “MEES regime”). Although landlords cannot lease sub-standard properties, the MEES regime does not require them to end an ongoing landlord and tenant relationship to obtain possession to undertake improvement works . In some cases, a landlord may rely on exemptions or agree works with the tenant. Whether Ground F is available to rely on will depend on whether the proposed works amount to redevelopment and the nature of the works.
2. Refurbishment, retrofitting and other modern construction methods may fall outside the existing categories of demolition, reconstruction and substantial construction, causing practical difficulties. 

To balance the landlord’s ability to redevelop with the tenant’s renewal rights, the Law Commission seeks views on three options for reform: 

1. Expand the categories of works that can satisfy Ground F and include a purpose/motive filter 

This would allow modern construction methods, such as retrofitting and refurbishment, to qualify where they serve a specified purpose or policy aim. The Law Commission proposes that this would give landlords more certainty that their plans will satisfy Ground F and will facilitate works in the wider public interest. They accept that this may also introduce additional complexity by creating separate categories insofar as some grounds will not need to establish a purpose, but others will.  

2. Expand the categories of works that can satisfy Ground F and do not include a purpose/motive filter

This is similar to option 1, without the requirement to show that newly introduced methods of construction are being undertaken for a particular motive or purpose. This test would be simpler and is likely to reduce disputes about the landlord's motive. However, it could shift the balance towards landlords by allowing Ground F to be satisfied in a wider range of circumstances.

3. Replace the existing categories with a general test based on whether “substantial works” are intended 

A general “substantial works” test would offer greater flexibility and better accommodate future construction methods by allowing courts to consider a broad range of factual circumstances. However, it could also make Ground F easier for landlords to establish, increasing the risk that tenants would need to rely on section 31A of the Act to propose a renewal tenancy that permits the works. Section 31A of the Act might require the tenant to accept a term allowing the landlord to carry out the works without obtaining possession, or to take a tenancy of part only. That burden may fall particularly heavily on tenants without legal advice.

The landlord must show that the proposed works cannot reasonably be carried out while the tenant remains in occupation. If the existing lease already permits the landlord to enter and carry out the works, Ground F is unlikely to be available. The Law Commission does not propose to change this.

Ground F may be a familiar tool, but the consultation shows it is under pressure to keep pace with modern property realities. The challenge for reform will be ensuring landlords can deliver genuine redevelopment and sustainability works, without weakening the security of tenure that sits at the heart of the 1954 Act.