Continuing occupation after the expiry of a lease

27 June, 2014

The Court of Appeal revisited the 2013 High Court decision in Erimus Housing Limited -v- Barclays Wealth Trustees (Jersey) Limited recently, in a judgment that makes clear that the nature of a tenant’s holding over following expiry of a lease must be viewed in light of the specific circumstance of the occupation.

 

In Erimus, the appellant had occupied premises as tenant under a 5 year contracted-out lease granted by Barclays, the landlord. The tenant held over following expiry of the lease, as negotiations were underway in respect of a new lease of the premises.

 

Terms for a new 3 year lease were eventually agreed in principle but, following protracted discussions and having decided larger premises were required, the tenant served notice on the landlord at the end of May 2012 to expire on 31 August 2012. The tenant submitted that its occupation had been as tenant at will.

 

The landlord argued that this notice was ineffective as the tenant had in fact been occupying the premises under an implied periodic yearly tenancy from the end of the previous lease. Notice given at the end of May would be insufficient under the periodic tenancy.

 

Overturning the decision at first instance to imply a periodic tenancy, Patten LJ emphasised the importance to be placed on the context in which the parties’ conduct must be viewed. Whilst negotiations regarding the new lease had been ‘slow and lacking any urgency’, Patten LJ said that negotiations did continue and were continuing in respect of a full lease, and that both landlord and tenant intended to continue these negotiations. There was no evidence to suggest that the parties wished to enter into a separate arrangement to formalise that occupation under a periodic tenancy during this time.

 

Alongside emphasising the fluid nature of lease negotiations, the case provides a stark reminder to landlords and tenants alike of the importance in ensuring that they document relationships with clarity and precision. Without certainty, disputes are likely to arise, which only lead to a costly and unpredictable resolution.