Tenancy At Will Or A Periodic Tenancy?

A recent High Court decision in Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited [2014] EWCA Civ 303 looked at the risks for tenants of staying in occupation or holding over at the end of a fixed term of a lease contracted out of the Landlord and Tenant Act 1954.

Erimus was occupying an office premises in Middlesbrough under a five year lease contracted out of the provisions of the Landlord and Tenant Act. The lease expired on 31 October 2009. Discussions had begun between the two parties regarding new lease terms but nothing had formally been agreed. The lease expired and the tenant stayed in occupation paying rent under the terms of the old lease. In January 2010 the tenant put forward a counter-proposal offering a lower annual rent.

By 2012 the tenant had decided to move elsewhere and served notice on the landlord purporting to end the tenancy on 31 August 2012. The question for the Court was whether the tenant held over under a tenancy at will or a periodic tenancy. There are three key differences between the two-

1)      Security of tenure- a tenancy at will does not give the tenant security of tenure whereas a periodic tenancy does

2)      Stamp Duty Land Tax- a tenancy at will is exempt whereas a periodic tenancy is subject to SDLT

3)      Notice- a tenancy at will can be brought to an end immediately whereas a periodic tenancy requires notice (usually 6 months’ notice where rent is expressed as X amount per annum- even if paid quarterly)

The landlord argued that the tenant was required to give at least 6 months’ notice as they occupied under a yearly periodic tenancy. The Court in making its decision looked at the negotiations between the parties, the fact that any periodic tenancy would carry with it statutory protection under the 1954 Act, but the intended new lease was intended to be contracted out of this Act. It was therefore decided Erimus were a tenant at will and their solicitor’s notice had ended the tenancy.

Following this decision it is key that tenants should start negotiations for a new lease in good time. If you require further information on any of the above then please contact our Commercial Property department on 01254 222399.

This entry was posted in Commercial Property.

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