As you were: Court of Appeal allays fears about inadvertent creation of periodic tenancy

In my previous article " When is a tenancy at will not a tenancy at will? When it is a periodic tenancy", I discussed the surprising outcome of Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited [2013]. In that case, Mr M Jarvis QC concluded that a periodic tenancy had arisen after a tenant had remained in occupation of a commercial property after the lease term had expired, despite the tenant having no statutory right to remain in occupation.  The judgment surprised many as there was a general assumption that a tenant's ongoing occupation of premises in such circumstances was pursuant to a tenancy at will.

The finding that a yearly periodic tenancy had arisen meant that Erimus (the tenant) was liable for a further 13 months' rent amounting to approximately £185,000. It was no surprise that Erimus appealed. In a unanimous decision, the Court of Appeal allowed the appeal and overturned the original judgment, concluding that Erimus' occupation after the lease term expired was under a tenancy at will.

Giving the leading judgment in the unanimous decision, Lord Justice Patten explained that:

  • whilst the negotiation were not active or continuous, there was no evidence that the negotiations between the parties had ceased or been abandoned by the parties and in particular it was not possible to say that there was ever a time when the parties ceased contemplating entering into a new contracted-out lease
  • there was no evidence to suggest that either party intended to grant a new lease except upon the terms which were ultimately to be agreed
  • there was nothing in the parties conduct that was consistent with the creation of a yearly tenancy in advance of the grant of a new lease
  • when a tenant holds over after the fixed term expires and the parties are in negotiations for a new lease, the obvious and overwhelming inference will be that the parties did not intend to enter into any intermediate contractual relationship inconsistent with the notion that the parties are seeking to agree a new lease. In most cases, this will lead to a conclusion that the occupier remains in occupation as a tenant at will pending execution of a new lease and clear and compelling evidence will be needed to establish otherwise.

Each case will be taken on its individual merits, but the Court of Appeal's decision emphasises the importance of documenting the continued occupation of the property after the expiry of a contracted out lease together with the ongoing negotiations. Whilst the assumption will be that a tenancy at will exists, a written Tenancy at Will will provide evidence that the parties do not intend to create a periodic tenancy.

Posted on: 15/04/2014

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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