Lease expiry: a warning for landlords and tenants!
29 November 2013
On the expiry of a lease which is excluded from the protection of Part 2 of the Landlord and Tenant Act 1954, it is not uncommon for a tenant to remain in occupation following the expiry date and continue to pay rent.
In the 1991 case of Javad v Aqil  the court looked at the status of a tenant who held over in such circumstances while negotiations for a new lease continued. The landlord continued to accept rent from the tenant. The court concluded that on the expiry of the contracted out lease a tenancy at will arise. As a consequence either party was able to give notice terminating this tenancy at will at any time.
How much notice will I need to give if I outstay my lease?
In the recent case of Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited , a tenant remained in occupation following the expiry of a contracted out lease. Negotiations continued for some time between the parties in a rather half-hearted fashion but it was clear from the discussions that the landlord would not require the tenant to vacate without giving notice.
The tenant sought to vacate and gave three months' notice to the landlord. However, the court concluded that a new periodic tenancy had arisen following the expiry of the contracted out lease, by virtue of the negotiations which had taken place and the conduct of the parties. As a consequence, the tenant was required to give 13 months' notice to terminate the periodic tenancy.
What does this mean for landlords?
While the decision in this case was bad news for the tenant, it should also set alarm bells ringing for landlords. While the court did not look at the point in detail, a further consequence of its decision means that a tenant who holds over after the expiry of a contracted out lease, giving rise to a new periodic tenancy, could well claim that the new periodic tenancy enjoys the protection of Part 2 of the Landlord and Tenant Act 1954.
To avoid uncertainty as to the status of tenants holding over after the expiry of a contracted out lease, it is suggested that landlords and tenants would be well advised to take decisive action when a contracted out lease expires. Accordingly, it would be advisable to formally document any continued occupation following the expiry of a contracted out lease as soon as possible.