Holding over during negotiations for new lease. Tenancy at will? How to calculate rent?

In Dean and Chapter of the Cathedral and Metropolitan Church of Christ, Canterbury v Whitbread ((1996) 72 P. & C.R. 9) a lease had come to an end. The parties tried to negotiate a new lease. The tenant remained in occupation during the negotiations. There had been some discussion as to the rent that they should pay during the period of holding over but they were never concluded. In the end, the tenant changed its mind and moved out. The court had to decide on the nature of the tenant’s occupation during the holding over and as to the sum that the tenant should pay for its use and occupation of the property during the holding over. The period of the holding over was a little more than a year.

First, the court decided that the tenant was a tenant at will during the holding over:

‘I think that the critical test is (a) that this was a holding over for all practical purposes except, arguably, rent, as if the old tenancy had continued, (b) that it was, as I found, wholly consensual, and (c) the initial purpose was to negotiate terms for a new tenancy. When that purpose was exhausted nothing was done by either party to change the nature of the arrangement.’ (13, H.H. Judge Cooke)

As to the payment for use and occupation, the first question was whether it should be the same as the rent payable under the old lease. The court said that there was a presumption to this effect but that it was rebutted where, as here, there was evidence of disagreement between the parties as to the sum to be paid (and the same would be true if they had agreed that the rent was to be some other, perhaps unspecified, figure) (15)

The landlord had to elect (before judgment) for a sum calculated either on the basis of the loss to the landlord or the gain to the tenant (but there was likely to be no difference in this case whichever approach was taken). The ordinary measure is the proper letting value of the property for the relevant period (16).

The judge set out his basic approach:

‘On my view of the basic law, one is entitled to look not at what some hypothetical market would have been for a 12-month lease with no security, but what a holding-over tenant and this tenant carrying on this business and dealing with these landlords would pay for a further year at the end of his tenancy, on the basis that it would be his last year (I think that one is entitled to use hindsight) in order to evaluate the asset of the tenancy that the tenant actually got.’ (19)

The court took the rent paid by the new tenant who subsequently took a lease of the property as its basis of valuation but making adjustments to take account of the fact that the new tenant took on a more extensive repairing covenant, the fact that the new tenant was not as strong a covenant as the outgoing tenant and the fact that the lease was only for a period of one year.

Michael Lower

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