Lease expiry

Key points on Lease Expiry

The best practice to prevent a Tenant acquiring rights under the Landlord & Tenant Act 1954 (1954 Act) on the expiry of a lease contracted out of the 1954 Act is the following:-

1.The landlord (including its agents) should not to demand or collect any payment (whether as rent, mesne profits or otherwise) in respect of any period after the lease has expired;

2.The landlord’s solicitors should send an open letter demanding possession of the property to the former tenant that has remained in occupation of the property;

3.If the landlord would like to enter into a new lease, the landlord’s solicitors should send a separate letter to the former tenant at the same time as the open letter (and stated to be entirely “without prejudice” to the open letter), in which they state that the landlord is not intending to take proceedings for possession until after a stipulated date to allow negotiations for a new lease to take place, whilst reserving the landlord’s right to take such proceedings at any time if it chooses. The landlord should try and get the tenant to endorse and return a copy of this letter by way of acknowledgement.

Landlords do not always like to put in place a rent stop as it means that income is lost in the short term. However, it is usually recovered on completion of the renewal lease. It is very difficult to state whether the tenant has gained security. However, the more time that passes between the expiry of a contracted out lease and the landlord taking action, or if the landlord (or its agents) demands rent for a period after the expiry of the lease, the tenant’s continued occupation could be deemed to be one of the following:-

• A tenancy at will. This can be created expressly or by inference and exists where there is a tenancy on terms that either party may determine at any time. It is not generally regarded as constituting an estate in land. A tenancy at will does not give the tenant a right to a lease renewal under the LTA 1954;

• A periodic tenancy. This can be created by express agreement or by implication, where there is a landlord and tenant relationship and rent is demanded and paid by reference to a particular time period. The demand and payment of rent is not a definitive indication of a periodic tenancy but it is one of the factors that the court will take into account. A periodic tenancy gives the tenant a right to a lease renewal under the LTA 1954. If a periodic tenancy with statutory protection has been created, entering into a new lease will act as a surrender of this protected tenancy.

Whether a tenancy at will or a periodic tenancy has been created will depend on the facts of the case. The following factors could be an indication that the new lease being negotiated was intended to create a legal relationship between the parties and the tenant’s continued occupation is a tenancy at will rather than a periodic tenancy:-

• The length of time that has passed since the lease has expired;

• Whether negotiations for a new lease had been taking place, will be taken into account. For example, in London Baggage Co (Charing Cross) Ltd v Railtrack plc [2000] EGCS 57, a tenant holding over after the expiry of its lease, pending the negotiation of a new lease, was held to be a tenant at will.

The bottom line is that the landlord needs to seek to regularise the position as soon as possible to avoid inadvertently giving the tenant rights under the 1954 Act.

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