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Holding over – tenancy or not?

Desultory or slow negotiations will not give rise to a renewal tenancy.

That is the (perhaps obvious) conclusion of the Court of Appeal in Erimus Housing Limited v Barclays Wealth Trustees (Jersey) Ltd & ors [2014] EWCA Civ 303.

T had a 5 year commercial lease. It had contracted out of the security of tenure provisions of LTA 1954. The annual rent was payable quarterly in advance. The lease expired on 31 October 2009 and T continued in occupation. No contract was entered into formalising the basis upon which T continued to occupy. Various offers and counter-offers were exchanged. But these dried up in August 2011. On 30 May 2012 T decided to vacate and gave L one quarter’s notice.

At issue was whether T’s notice was effective. If T’s occupation was as a tenant at will it was. But L contended that (i) T’s continued occupation and payment of rent post-August 2011 gave rise to an annual periodic tenancy commanding 6 months’ notice which would have to expire on the anniversary or half-anniversary of the term; and (ii) the renewal periodic tenancy enjoyed LTA protection so the notice was invalid.

At first instance the court held that the discussions were merely a half-hearted exercise. The relationship had evolved whereby it was accepted that L would not dispossess T without notice. Moreover, T wished to remain in occupation until at least March 2012. This gave rise to a periodic tenancy. T’s notice was ineffective.

The Court of Appeal reversed this finding. Applying Javad v Aqil [1991] 1 WLR 1007 it held that, although negotiations were slow, there was no evidence they had been abandoned. When a party holds over at the end of the contractual term he does so, without more, as a tenant at sufferance until his possession is consented to by L. With such consent he becomes a tenant at will and the continued payment of rent is not inconsistent with his remaining so. The parties’ contractual intentions fall to be determined by looking at all the circumstances. Generally, that will mean T remaining as a tenant at will pending the execution of a new lease.

Derek Kerr / 1st May 2014


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