Tenant holding over and negotiating new lease: when is there a periodic tenancy?

In Erimus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd ([2014] EWCA Civ 303) Erimus Housing occupied office premises under a five year lease. When the lease came to an end, they continued paying rent. The parties engaged in negotiations for the grant of a new lease but without any great sense of urgency. Eventually, after two years, the terms of a new lease were agreed. Then the tenants changed their mind and gave notice that they intended to vacate the property.

The landlords argued that by holding over and paying rent the tenants had entered into an implied yearly tenancy and had to give six months’ notice to quit expiring at the end of a complete year of the tenancy. The tenants argued that their possession was on the basis of a tenancy at will.

Patten LJ referred to the judgment of Nicholls LJ  Javad v Aqil:

‘Of course, when one party permits another to enter or remain upon his land on payment of a sum of money, and that other has no statutory entitlement to be there, almost inevitably there will be some consensual relationship between them. It may be no more than a licence determinable at any time or a tenancy at will. But when and so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a very limited interest, be it licence or tenancy. Otherwise the court would be in danger of inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties’ expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all. ‘ (Javid v Aqil [18])

It is all a question of what the parties could reasonably be taken to have intended.

Thus:

‘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’ (Erimus Housing at [23] per Patten LJ).

In  Erimus Housing, it was unlikely that the parties intended to create a periodic tenancy:

‘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.’ (Erimus Housing at [23]).

There was no implied periodic tenancy.

Michael Lower

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The Limitation Ordinance and tenancies ‘without a lease in writing’

In Mitchell v Watkinson ([2014] EWCA Civ 1472, CA (Eng)) the English Court of Appeal had to look at the application of the English equivalent of section 12(2) of the Limitation Ordinance. Section 12(2) provides that:

‘A tenancy from year to year or other period, without a lease in writing, shall, for the purposes of this Ordinance, be deemed to be determined at the expiration of the first year or other period, and accordingly the right of action of the person entitled to the land subject to the tenancy shall be deemed to have accrued at the date of such determination:

Provided that, where any rent has subsequently been received in respect of the tenancy, the right of action shall be deemed to have accrued on the date of the last receipt of rent.’

In this case, a father, having given land to his son, purported to grant a written periodic tenancy of it to trustees who held the tenancy on trust for an unincorporated association (a cricket club). Shortly afterwards, on 2nd October 1947, the father’ solicitors wrote to one of the trustees telling him that the land had been conveyed to the son but inaccurately stating that this had happened after the date of the tenancy. The club’s last payment of rent was made on 8th October 1974. The club, relying on the equivalent of section 12(2), argued that time began to run on that date and that they had acquired title by adverse possession twelve years later.

This analysis relied on the proposition that the trustees did not hold under the terms of the original written agreement but under a later implied periodic tenancy. The club’s argument was that it did not hold the property under the terms of the written agreement with the father but by virtue of an implied periodic tenancy based on the payment and acceptance of rent to the son’s agents once it had been pointed out that he was the owner of the land. Thus, it was argued, the periodic tenancy was ‘without a lease in writing’ and section 12(2) applied. This succeeded.

The owner (the son’s widow) argued, among other things, that the original written lease created a tenancy by estoppel which was to be treated as having been assigned to the son. This argument failed. The correct view was that the tenancy by estoppel had been impliedly surrendered on the grant of the new implied tenancy by the son([37]).

The owner also contended that the result of the letter of 2nd October 1947 and the subsequent conduct was to give rise to an estoppel by convention so that the tenants were estopped from denying that they held under the terms of the written agreement granted by the father. This failed because the letter of 2nd October 1947 could not be the basis for a common assumption that the tenants held under the terms of the written agreement; the parties might equally plausibly have understood that a new implied tenancy came into being (and almost certainly gave no thought to the distinction) ([55]).

Michael Lower

 

Tenant allowed into possession during lease negotiations: periodic tenancy or tenancy at will?

In Javad v Aqil ([1990] 2 EGLR 82, CA (Eng)) L and T were negotiating a fixed term lease. L allowed T into possession during the term and accepted rent. The negotiations failed. The question was whether T was a periodic tenant or a tenant at will. The court emphasised that it depended on the objective intention of the parties. If T was alleging that a periodic tenancy existed he would have to show it. Here there was no evidence to show that the parties intended a periodic tenancy. T was a tenant at will.

Nicholls L.J. said:

‘The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy. But I emphasise the qualification “failing more”. Frequently there will be more. Indeed, nowadays there normally will be other material surrounding circumstances. The simple situation is unlikely to arise often, not least because of the extent to which statute has intervened in landlord-tenant relationships. Where there is more than the simple situation, the inference sensibly and reasonably to be drawn will depend upon a fair consideration of all the circumstances, of which the payment of rent on a periodical basis is only one, albeit a very important one. This is so however large or small may be the amount of the payment.’ (at 84)

 

Michael Lower