Are you a tenant remaining in occupation of your property after expiry of a lease excluded from the security of tenure provisions of the Landlord and Tenant Act 1954 (‘the Act’)? Are you feeling pretty comfortable that you’re doing so as a tenant at will and going about your business as usual while negotiations with the landlord are rumbling on? If so, the decision in a recent case may come as an unpleasant surprise which could lend a sense of urgency to those same negotiations.
A crucial distinction…
Irrespective of whether or not you have the protection of the 1954 Act, it is often the case that tenants remain in situ whilst the terms of a further lease are being negotiated. A tenant who has the protection of the 1954 Act does so because it has a legal right to remain in the premises. However, difficulties arise where a tenant remains in occupation following expiry of an excluded lease (ie where there is no legal right to remain). This is because the nature of the tenancy is not always clear. Are you occupying as a tenant at will or under a periodic tenancy? The distinction is crucial, as the answer will affect your liability for rent.
… a devastating blow…
Generally, the preferred position is to occupy as a tenant at will, which was amply illustrated in a recent High Court decision. The lease had expired and the tenant had remained in occupation for 2 years whilst half-hearted negotiations for a new lease took place. The tenant then found premises which suited it much better, informed the landlord it was leaving and thought the job was done. When it subsequently gave the landlord 3 months’ notice of its intention to leave, the landlord clearly decided it wasn’t going to give up the income without a fight. In the subsequent proceedings the Court decided that, in the particular circumstances of the case, an annual periodic tenancy had arisen. This was a devastating blow for the tenant.
… and a very lucky landlord
The Landlord was successful in its argument that the notice period was insufficient. Under a periodic tenancy the notice period must mirror the period in respect of which rent is paid and must end on the day before the anniversary of the commencement of the tenancy. The tenant therefore had to provide 13 months’ notice and therefore found itself on the hook for some considerable additional rent. The Court considered the parties’ conduct following expiry of the fixed term and decided that neither party intended for it to be possible for the tenant to be asked to leave without notice (which is possible where a tenancy at will is implied) and the tenant had even asked for a specific period in which to remain at the property.
Make your intentions clear
Following this decision, if you’re a tenant remaining in occupation after expiry of an excluded lease, beware lengthy negotiations and make sure you document the basis upon which you occupy the property. A tenancy at will works well for both parties. For a tenant, you can avoid liability under a potential periodic tenancy and landlords, you can avoid the tenant acquiring security of tenure by reason of its occupation.
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