Sainsbury’s Supermarkets Limited v Medley Assets Limited

In the recent Sainsbury’s Supermarkets Limited v Medley Assets Limited case, a significant legal issue arose concerning commercial lease renewals.

Factual Background

Sainsbury’s Supermarkets Limited was the commercial tenant of a property located at 329-331 Kentish Town Road, London. The property consisted of a basement, ground floor trading area, and two upper floors.
The Landlord intended to redevelop the property and relied on ground (f) to oppose granting a new lease to Sainsbury’s. Ground (f) is governed by section 30 of the Landlord and Tenant Act 1954.
The Landlord’s intention was to excavate the basement, widen the stairs from the ground floor to the first floor, and refurbish the upper floors into office units. No works were planned for the front of the shop on the ground floor.

Sainsbury’s temporarily vacated part of the premises affected by the Landlord’s works. Specifically, they moved all their operations to the front of the ground floor and erected stud walls around the stairs.

Their argument was twofold

First, they challenged the Landlord’s intention to carry out the stated works.
Second, they asserted that for the purpose of ground (f), the Court could only consider the “holding” as defined in section 23(3) of the Act. This definition refers to the part of the building occupied by the tenant for its business, at the time of the trial of the preliminary issue (referred to as “the Occupied Part”).

The Judge ruled in favour of Sainsbury’s and found that the Landlord had failed to provide sufficient evidence of its intention to carry out the stated works.
Importantly, the Judge also expressed a view on the legal arguments related to “the holding.”
The relevant provisions of the Act include sections 23, 30, 32, and 46.
Section 23(3) defines “the holding” as the property comprised in the tenancy, excluding any part not occupied by the tenant or their employees for business purposes.
Section 30(f) deals with the termination of the current tenancy and the landlord’s intention to demolish, reconstruct, or carry out substantial construction work on the holding.

This decision has potential implications for commercial tenants seeking to defeat ground (f) during lease renewals.
Although a County Court decision, it provides useful insights for legal advisors handling commercial lease renewals.