Court dismisses tenant's claim for new tenancy due to lack of proven continuous business user and disingenuous equity claim.

Record No: 2021/ 04665

Neutral Citation: [2024] IECC 11

AN CHÚIRT CHUARDA

THE CIRCUIT COURT

DUBLIN CIRCUIT CIVIL COURT COUNTY OF THE CITY OF DUBLIN

IN THE MATTER OF

NEXUS CORPORATE SOLUTIONS LIMITED (FORMERLY BKRM CORPORATE

SERVICES LTD)

Plaintiff

and

TANANA HOMES LIMITED AND TIMO BARRY

Defendant(s)

Judgment of Her Honour Judge Jennifer O’Brien delivered this 19th day of July 2024

1. This case is brought by way of Equity Civil Bill issued on 12 October 2021, wherein the plaintiff, an accountancy and auditing firm practising under the style of BKRM, and now under the style of Nexus claims that it is a commercial tenant of a property located at 81 and 82 North Strand, Dublin 3 (“The Property”). The accountancy practice operated from the property as a tenant under the corporate name BKRM Corporate Services Limited since October 2014. Prior to 2014 the practice operated by way of unincorporated partnership between the periods of 2001 to 2014 and its immediate predecessor has been operating at the property since 1993, practising under the style and title of Bastow Keane McLean. The first named defendant is a company registered in Ireland and is engaged in the service of developing building projects. The second named defendant is a director of the first named defendant. The Court is asked to adjudicate upon the matter in accordance with Section 3(1) of the Landlord and Tenant (Amendment) Act 1980.

2. The property consists of two adjoining buildings comprising of three stories, including eleven office units, a training/ consultation room and a communications room. The property itself is a tenement within the meaning attributed to same under the provisions of Section 5 of the Landlord and Tenant (Amendment) Act 1980. The plaintiff states that they entered into an oral lease agreement on 1 October 2014 with the defendant’s predecessors in title, namely Thomas Keane and Francis McLean. It was agreed between the plaintiff company and the defendant’s predecessor in title that the plaintiff company would occupy the property for the purposes of carrying on a business in return for an annual rent of €18,000 which is paid by way of monthly instalments. The plaintiff claims that since about 2014, it has been operating out of the property and using it for meeting clients who are located on the north side of Dublin. The plaintiff company has retained a number of clients in the north Dublin region and has established a considerably good reputation in the region.

On 18 November 2020 the defendant’s predecessor in title advertised the property for sale on many websites and included in the advertisement were the words:

“Please note that the tenants are in occupation of the entire property and are paying rent of €18,000 per annum. Please note this tenant is not affected by the sale.”

3. On or about 16 December 2020, the defendants purchased the property, it was at all material times made very clear to the defendants, their servants and or agents that there was a tenant in occupation of the property, namely the plaintiff company and that they were not affected by the sale. The plaintiff claims that when ownership of the property passed to the defendants the plaintiff company continued to discharge their rental obligations in accordance with the pre-existing agreement with the plaintiff company. This fact is in dispute. On 5 August 2021 the plaintiff company received a letter by way of registered post from Padraig Hyland & Company Solicitors instructed on behalf of the defendants, wherein it was claimed that the plaintiff’s tenancy was a monthly periodic tenancy. Within that letter it was alleged that the plaintiff company failed to make rental payments to the defendants and the defendant’s predecessor in title. It was also alleged that the plaintiff failed to keep the property in a good state of repair and had failed to pay rates. On this basis the defendants served notice to quit soon to the monthly period of tenancy. Accordingly, it was demanded that the plaintiff quit and vacate the property one month from 31 August 2021, which was the next gale day.

4. The plaintiff company instructed solicitors to respond wherein it was strenuously refuted that the plaintiff company had failed to pay rent to either the defendants or their predecessor in title. It was also denied that the plaintiff company failed to keep the property in a good state of repair and failed to pay rates. The existence of a monthly periodic tenancy was also denied. The plaintiffs claimed that they at all material times were operating under a yearly tenancy and that the payment of which was divisible by 12. As such the plaintiff expressly pleads that the defendants are not entitled to seek to terminate the plaintiff’s tenancy by providing one month’s notice. As such, the plaintiff’s application is for directions from the Court pursuant to Section 18 of the Landlord and Tenant (Amendment) Act 1980 to fix the terms of a new tenancy between the plaintiff and the defendant. By way of letter dated 9 September 2021 the plaintiff’s solicitor furnished the defendant’s solicitor with a notice of intention to claim relief in accordance with the provisions of the Landlord and Tenant Regulations, 1980 (S.I. No. 272 of 1980) wherein the plaintiff indicated that they were seeking to claim a new tenancy in accordance with Part II of the Landlord and Tenant (Amendment) Act 1980.

5. The defendant filed a full defence, ultimately it was agreed that the defendants had served a valid notice to quit. The defendants pleaded that it is an express and or implied term of the plaintiff’s tenancy, inter alia, that the plaintiff must pay rent, pay rates to Dublin City Council, and keep the property in good repair. The defendants submit that the contents of any advertisements which are denied, do not alter the legal reality of the occupation of the property by the plaintiff. The defendants admit that they purchased the property as pleaded.

It is further admitted that the occupation of the property by the plaintiff was made known to the defendants prior to the purchase of the property, but the terms and legal status of the occupation were not made known. It was admitted that at the date of the Equity Civil Bill,

12 October 2021 the plaintiff had only paid €6,000 to the defendants in rent, equal to four months’ rent, despite the fact that over four months’ rent ought to have been paid to the defendants at that point in time. It is claimed that the plaintiff is not entitled to a new tenancy in the property pursuant to Section 17 (1) (a) of the Act due to the following:

1. The plaintiff’s failure to pay rent to the defendant.

2. The plaintiff’s failure to pay rent to the defendant’s predecessor in title.

3. The plaintiff’s failure to pay rates to Dublin City Council.

4. The plaintiff’s failure to keep the property in a good state of repair.

6. The Court heard evidence over a number of days from the parties and from their respective experts. The Court was invited to consider the applicable law, and counsel for the plaintiff referred to an annotated copy of Wylie on Irish Landlord and Tenants Law, and also the chapter on the right to a new tenancy from the Landlord and Tenant Law: The Commercial Sector by Mema Byrne BL, which provides:

“The right to a new tenancy was originally conferred in the Landlord and Tenant Act 1931. The right is now governed by Part II of the Landlord and Tenant (Amendment) Act 1980 (“The 1980 Act as amended”).”

7. In order to qualify under Part II of the Landlord and Tenant (Amendment) Act 1980 for the right to a new tenancy, the following must be present:

1. The property must be a tenement within the meaning of Section 5 of the 1980 Act; and

2. The tenant must occupy under a tenancy; and

3. One of the three equities (business, long user or improvement) must be present; and

4. The property must not be an excluded property; and

5. None of the restrictions in Section 17 shall apply.

8. The 1980 Act only applies where the tenant occupies “a Tenement”. “A Tenement” is defined in Section 5 as:

“Land covered wholly or partly by buildings or a defined portion of a building;

And if the land is only partly covered by buildings, the portion not covered is subsidiary and ancillary to the buildings.”

9. Reference is also made to Section 13 (1) (a) which deals with the right to a new tenancy and an application under Part II (1):

(1) This part applies to a tenement at any time if-

(a) The tenement was, during the whole of the period of five years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or his predecessor in title and bona fide used wholly or partly for the purpose of carrying on a business, or

(b) The tenement was, during the whole of the period of 20 years ending up at that time, continuously in the occupation of the person who was the tenant immediately before that time or his predecessor in title or;

(c) Improvements have been made on the tenement and the tenant would, if this Part did not apply to the tenant, be entitled to compensation for those improvements under Part V and not less than 1/2 of the letting value of the tenement at that time is attributable to those improvements.”

10. The Court was also referred to the decision in Twil Limited v Kearney [2001] IESC 52, where the majority of the Supreme Court took the view that nevertheless the crystallisation point was the date at the determination of the existing tenancy. As such, the 5-year period is the period immediately preceding the point of crystallisation, that is the date on which the notice to quit was served. As such, in this case the plaintiff needs to show that they were in continuous occupation for a period of five years prior to 1 October 2021 and that the property was used for the business.

11. Reference was made to Wylie on Irish Landlord and Tenant Law, 4th edition at paragraph

30.13 which provides:

“Turning then to the business equity, what the tenant must establish is that:

“the tenement was, during the whole of the period of five years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purpose of carrying on a business ...”

12. The plaintiff claims that the property was being used in this manner prior to 1 October 2021 for the requisite period, and that also that there was a sign outside the property which involved an element of use. It was submitted that, leaving aside the question of meetings at the premises, use of a sign alone meets the statutory purpose. It is the plaintiff’s evidence that the building was used for business purposes for the requisite period. Reference is also made in page 713 of Wylie and to the case of Plant v Oakes [1991] 1 IR 185. That case involved a house 500 yards from the road and connected by a long avenue to a garage at the road where the tenant of the house carried on his business. It was claimed that the dining room in the house was used by the tenant’s wife to do some bookkeeping and other paperwork connected with his business. O’Hanlon J concluded that the house was partly used for the purpose of carrying on the business for the then qualifying period of three years occupation and that this use, being the most convenient economic way of conducting the family business was bona fide. It was not merely embarked upon as a subterfuge for the purpose of building up a business equity as a basis for a claim to a new lease under the Act.

13. It was further submitted by counsel for the plaintiff that the notice to quit was not served for good and sufficient reason. The Court was also referred to the decision in Tarlo v Kenny [1948] IR 28 Dixon J (1947) and it was submitted that the Court cannot rely on circumstances arising after the service of notice to quit. The Court was referred to the

decision of Gavan Duffy J in the Arnott’s case, McEvoy v Arnott and Company Ltd High Court [1943] 77 ILTR 83. He held that the landlords had not, in the tenant’s failure to keep the tenement in good and sufficient repair, a good reason for terminating the tenancy in all the circumstances of the case. It was submitted that the bar is quite high before the landlord can rely on the provisions of Section 17. Counsel then made various submissions regarding whether any prejudice would be suffered by the landlord under the various headings set out in the notice to quit, it was submitted that this would not be the case. The Court was then referred to various aspects of the evidence given in the course of the trial.

14. Counsel for the defendant submitted that the business equity could not be established merely by having a sign outside the house and that there was no case law to provide precedent for such an assertion. It was submitted that the business equity has to be in five years of continuous use on the last day of September 2021. Counsel submitted that the

decision in Plant v Oakes [1989] IEHC 29 related to a completely different set of circumstances to the one we have here where the building is not in use at all. It was further submitted that this case does not provide precedent for the argument made with regard to signage being bona fide use of the building. Reference was made to the paragraph dealing with the question of bona fide use and purported business user which is not genuine but merely for the purpose of making a claim with regard to build up of a business equity.

Counsel submitted that the plaintiff could no longer point to a continuing business user at the point when the tenancy came to be renewed. It was submitted that the word prejudice does not appear in the Act. Counsel referred to the evidence and submitted that the plaintiff’s witness did not distinguish between the years 2019, 2020, 2021, 2022 and 2023 when giving his evidence as to the manner in which the phone call from the defendant seeking a meeting at the Northside office was dealt with. Counsel submitted that there was a lack of evidence on the part of the plaintiff that there was any continuous user of the premises for business purposes in the five years prior to service of the notice to quit. The defendant had given evidence of attending the property during this period while he was visiting his mother’s home close by, and his evidence was that there was no one in attendance at the property at any time. Counsel went on to make submissions in relation to Section 17 of the Act.

15. Decision: Having heard the evidence of each party and their expert and what was offered by their respective counsel, the Court finds as follows:

1. As is common case, a valid notice to quit was served in the sense that the plaintiff was in arrears with rental payments to the defendant and, further rates were outstanding to Dublin City Council, and the property was in a poor state of repair at the time of service of the notice to quit.

2. The plaintiff has failed to establish a continuous business user for the period of five years prior to service of the notice to quit on 1 October 2021. The Court notes that the plaintiff gave evidence that the property was used continuously for business purposes during this time however, no detailed evidence was given to support these statements and indeed the only detailed evidence the Court has heard is from the defendant who was quite clear that the premises was unoccupied during the periods that he attended same and prior to service of the notice to quit. The plaintiff claimed to meet clients at that location however no actual examples of such meetings were provided to the Court.

The Court is also entitled to draw an inference given the presence of rodents and the lack of any of the usual indications that a person is in occupation of a property, such as use of electricity, use of kitchen and other facilities, use of any paper or correspondence in or directed to the office. The Court does not accept that the mere placement of a sign on the exterior wall is adequate for the purpose of establishing a business user of the property. Placement of such a sign does not involve any form of occupation in terms of the internal space at the premises and is merely ancillary in nature and does not therefore amount to or establish a business user. Presence of rodents also gives rise to the concern that the property is no longer fit for business purposes. This Court can simply not discern any kind of bona fide business user in all the circumstances of the evidence that has been heard over the course of two days. It is clear that the plaintiff has allowed this property to fall into serious disrepair. The Court is satisfied that this was also the position on the date that the notice to quit was served. The Court is of the view that the plaintiff is claiming a purported business user on a disingenuous basis for the purpose of claiming a business equity in order to persuade the Court that a new tenancy should be granted.

3. The Court is satisfied that there is no bona fide business equity in all the circumstances and in this regard the Court is persuaded by the evidence of the defendant and their experts.

4. As such, the Court dismisses the application of the plaintiff.

Appearances Helen O’ Sullivan BL for the plaintiff instructed by Connolly O’ Neill Solicitors. Neal Flynn BL for the defendant instructed by Padraig J. Hyland & Co Solicitors.