A ruling in a recent court case should serve as a warning to both tenants and landlords where a tenant is allowed to stay in a commercial property after the lease has expired and that lease was contracted out of the Landlord & Tenant Act 1954.
In Barclays Wealth Trustees (Jersey) Limited V Erimus Housing Limited (2013), a contracted out tenant remained in occupation after lease expiry and the landlord and tenant took their time agreeing terms for a new lease – two years in total. The tenant then changed its mind and notified the landlord that it intended to terminate its occupation.
Joanna Clark, solicitor at Adams & Remers comments: “The landlord argued successfully in court that the tenant occupied the property under an implied periodic tenancy, so that the tenant had to give six months notice before it could terminate the lease. The tenant therefore had to pay an additional £185,000 in rent to the landlord. This was because the negotiations for the new lease had been sporadic and half-hearted and the parties had acted in such a way that they both understood that the landlord would not seek to evict the tenant without notice.”
“It is not uncommon for parties to negotiate a new tenancy while the tenant is allowed to stay in occupation. My advice therefore is to document any occupation as soon as possible. If a contracted out lease ends and the tenant remains in occupation, a tenancy at will should be signed by both parties.”
Adams & Remers has produced a free guide on this subject at this link.