Holding over with landlord’s consent: tenancy at will or periodic tenancy?

In Erismus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd ([2014] EWCA Civ 303, CA (Eng)) EHL were tenants of Barclays under the terms of a five year lease that expired on 31 October 2009. They held over at the end of the lease and continued to pay the rent payable under the expired lease while they negotiated the terms of a new lease. The negotiations progressed slowly and by fits and starts but were never abandoned. The tenants then decided to move to new premises. They gave notice to terminate their possession on 31st August 2012. Barclays contended that EHL had been periodic tenants during the holding over; it was agreed between the parties that, if this were so, EHL could not give a notice to quit that would expire before 31st October 2013. Thus, this is a case about the factors to be borne in mind when considering whether or not an implied periodic tenancy has arisen during a holding over. The Court of Appeal turned to the judgment of Nicholls LJ in Javad v Aqil for the relevant principles.

Patten LJ, giving the leading judgment, then said:

‘When a party holds over after the end of the term of a lease he does so, without more, as a tenant on sufferance until his possession is consented to by the landlord.  With such consent he becomes at the very least a tenant at will and his continued payment of the rent is not inconsistent with his remaining a tenant at will even though the rent reserved by the former lease was an annual rent.  The payment of rent gives rise to no presumption of a periodic tenancy.  Rather, the parties’ contractual intentions fall to be determined by looking objectively at all relevant circumstances.  The most obvious and most significant circumstance in the present case, as in Javad v Aqil, was the fact that the parties were in negotiation for the grant of a new formal lease.  In these circumstances, as in any other subject to contract negotiations, the obvious and almost overwhelming inference will be that the parties did not intend to enter into any intermediate contractual arrangement inconsistent with remaining parties to ongoing negotiations.  In the landlord and tenant context that will in most cases lead to the conclusion that the occupier remained a tenant at will pending the execution of the new lease.  The inference is likely to be even stronger when any periodic tenancy would carry with it statutory protection under the 1954 Act which could be terminated by the tenant agreeing to surrender or terminating the tenancy by notice to quit: see Cardiothoracic Institute v Shrewdcrest Ltd [1986] 1 WLR 368.’ ([23])

EHL held over as tenants at will and not as periodic tenants.

Michael Lower

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