Columnist

Commercial landlords sleeping easier after Appeal ruling

By Andrew Stride, Director Professional Services, Dunlop Heywood

Commercial leases fall into two principle groups; those that come under the protection of the 1954 Act allowing renewal subject to conditions and then the Excluded Tenancies which have no protection.

The latter were once granted by Court Order but latest revisions to the legislation allow parties to agree contracting out - subject to following appropriate declaration procedures.

So what happens when a contracted out lease ends? The simple answer is that the landlord regains possession following expiry and is free to occupy or re-let as they wish.

However, in the real world many such situations are renegotiated between the parties so new terms can be agreed. If both parties are continuing negotiations whilst the lease expires but the new term and documents have not been agreed/signed then a tenant can be allowed to claim that a Protected Periodic Tenancy has arisen assuming that the landlord is continuing to collect rent and has not put a rent stop in place.

This particular circumstance arose in Barclays Wealth Trustees V Erimus Housing (2013). Initially the High Court held that a Periodic Tenancy had arisen. However, in this case, this worked against the tenant who didn’t want to create a yearly Periodic Tenancy which would require at least 6 months’ notice to terminate.

The matter was appealed to the Court of Appeal which overturned the initial judgement ruling that the occupation merely amounted to a tenancy at will and determined, subject to minimal notice.

The important fact here seems to be that the continued payment of rent itself does not create a Periodic Tenancy and overall circumstances must be viewed objectively to determine the intentions of the parties.

The fact that the parties had been involved in continuing discussions for a new lease it was seems unlikely that they would have intended to enter into an ‘intermediate contractual arrangement’ such as a Periodic Tenancy.

In most cases it’s therefore likely that a Tenancy at Will would arise although individual circumstances may of course influence specific cases. I think landlords are probably able to sleep a little easier as a result of this ruling.

This was posted in Bdaily's Members' News section by Dunlop Heywood .