In Berkeley Square Investments Limited – v - Berkeley Square Holdings Limited  UKUT 0384 (LC) a tenant successfully widened the user provision in its lease, by satisfying two of the statutory grounds under S.84 of the Law of Property Act 1925, to allow use of the premises as a private members club.
The applicant is the tenant of 45 Berkeley Square & 45 Hays Mews under a lease acquired in 2004, which expires in 2070. The permitted use of the premises was offices with ancillary residential use. The respondent is the landlord and freehold owner of the premises and the wider Berkeley Square estate.
No. 45 has not been substantially used as offices since around 2008 and, in 2013, the tenant decided that the premises would be suitable for use as a private members' club. In February 2014 the tenant made a planning application to convert the premises.
The planning permission was granted on 7 March 2016. In the meantime, in 2015, the landlord granted a lease of neighbouring no. 46 to Caprice Holdings, to be used as the new Annabels club.
The landlord opposed any change of use under the lease to permit the operation of a club at no.45.
The tenant sought permission from the Tribunal to modify the user clause under three grounds:
- the "reasonable user" ground- planning consent and a premises licence for 45 and 46 Berkeley Square demonstrated that private members' club use was reasonable;
- "obsolescence" - there was no demand for office space in Grade 1 listed buildings; and
- "no injury" to the landlord - the rent for a private members club would be higher than the current rent.
The landlord's principal objection was made on "estate management" grounds as the landlord required a balanced portfolio of assets.
The Tribunal did not accept that there would be any effect on the landlord's wider estate and found in the tenant's favour on grounds (a) and (c), allowing the lease modification subject to the inclusion of certain additional restrictions in the lease. It was relevant that the lease term did not expire until 2070 and the tenant only sought to modify the user clause. The Tribunal also found that the Landlord suffered no injury.
The key point here is that a landlord's refusal to consent to a tenant's plans will not always be the final word. Landlords should be prepared to explain why a restriction is beneficial if they are to successfully defeat an application to modify or discharge it.