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

 

Periodic tenancies and freedom of contract

Re Threlfall ((1880) 16 Ch D 274, CA (Eng)) concerned a lease at a yearly rent of GBP 800 payable in equal quarterly installments.  The landlord had the right to enter at any time after three months from the date of the lease without giving notice. The lease was contained in a mortgage deed (the mortgagee granted the lease to the mortgagor and the re-entry provision reflected this context). The question was whether this was a periodic tenancy or a tenancy at will. The English Court of Appeal held that there was a periodic tenancy despite the re-entry provisions.

Cotton LJ said:

‘But I know of no law or principle to prevent two persons agreeing that a yearly tenancy may be determined on whatever notice they like. There is freedom of contract in this respect. ‘ (at 281 – 2).

Michael Lower

Periodic tenancy: service of notice to quit on the tenant’s solicitor

In Hau Gay Yau v Wong Muk Din ([2014] HKEC 1456, CA) a landlord served notice to quit to determine a periodic tenancy on the solicitor acting for the tenant. The Court of Appeal, overturning the first instance decision, held that the notice had been validly served. Sections 62(2) – (4) of the Conveyancing and Property Ordinance do not exclude other modes of service than those that they specify ([22]). It was clear that the solicitors on whom the notice had been served had been instructed by the tenant in relation to this matter ([23]). The tenant’s actions showed that he regarded his solicitors as having had authority to receive the notice ([23]).

Michael Lower

Holding over: parties at cross-purposes

In Shum Tsing Fai v Chiap Heng Cheng (HK) Ltd ([2001] HKEC 296, CFI) a fixed term tenancy came to an end. The tenant had an option to renew for a further two years but did not exercise it. As the tenancy approached its end, the parties discussed a new tenancy and agreed a rent below that specified in the option. The parties were at cross-purposes: the landlord thought that the tenant was, in effect if not formally, exercising the option. The tenant intended the arrangement to be temporary until it had bought replacement premises. The tenant gave notice to quit after a few months and the question was whether it was entitled to do so or whether it was bound for the full term envisaged by the option. It was decided that the tenant was a periodic tenant and had been entitled to give notice to quit.

The court thought that the objective intention was for a temporary arrangement and rejected a tenancy at will or at sufferance. This left the periodic tenancy. It inferred, from the monthly rental payments, an intention to create a monthly periodic tenancy.

As to this, Cheung J. said:

‘Although reference is made [in Woodfall] to the word “presumption”, ultimately it is a matter of inference from all the circumstances of the case as to the nature of the tenancy.’

Michael Lower

Holding over

In Pang Kin Hang v Tsui Hung Restaurant Ltd ([1986] HKEC 12) T refused to leave the demised premises at the end of the term. L sought vacant possession and mesne profits by summary judgment. It was held that a full trial was needed as to whether or not there was an estoppel or oral agreement to grant a new tenancy.

The judgment contains this passage:

‘[I]t is well established that if a tenant whose lease has expired be permitted to continue in possession pending a treaty for a further lease, he is not a tenant from year to year, but a tenant strictly at will, until some other interest is granted to him.’ (Hon. Deputy Judge Saied)

Michael Lower

Periodic tenant can grant a lease for a term that exceeds a single period of the tenancy

In Chan Sang v Choy Yuk ([1963] HKLR 476) it was confirmed that a periodic tenant can grant a tenancy for a term that extends beyond a period of his tenancy but that it will cease to have effect if the periodic tenancy is determined:

‘It is not, I think, in dispute that a tenant holding under a periodic tenancy has an interest which would support the grant by him of a tenancy for a fixed term exceeding in length one period of his own tenancy. Nevertheless the interest of the sub lessee can subsist only so long as the head tenancy subsists’ (478, Huggins J.)

Notice to quit: validity of notice giving a specified date and then using a fall-back formula which might give a different date

In Leung Chung Ting (No 2) v Tin Yat Co ([1963] HKLR 304) T held under a monthly periodic tenancy. L gave T notice ‘to quit and deliver up possession by 19 November, 1961, or on the last day of your tenancy which shall expire next after one calendar month from the date of service of the said notice to quit.’ T argued that the notice have two date and was therefore invalid on account of its ambiguity. This argument failed.

Several authorities, commentaries and published precedents used this formula (the formula was applied in a slightly garbled way in this case and should have referred to ‘the month of your tenancy’). In this case, the general wording referred to the same date as that specified but even if the effect of the formula were to identify two different dates the notice would be valid. If the first date was valid, the rest of the formula could be treated as surplusage ((310, Hogan C.J.).

Huggins J. said:

‘It is, therefore, clearly permissible to add such general words even though the result be (as it will be if the date expressed is wrong) to name two different dates for the giving up of possession. One knows that in practice practitioners almost invariably do include such general words and, speaking for myself, I would think that at the present day they would be lacking in prudence if they did not. The basis upon which the alternative date is allowed to be stated is no doubt to mitigate the strictness of the old law. No prejudice results to the tenant, because the form of the general words makes it abundantly clear to him that the landlord is merely guarding himself against the consequence of a mistake as to the date upon which the periodic tenancy commenced and that the date expressed is to be the operative date only if the tenancy may lawfully be determined on, that day.’ (315)

Michael Lower

‘Waiver’ of notice to quit? New tenancy and estoppel

In Kam Wing Property Investments Ltd v Koncord Ltd ([2005] HKEC 213, CA) T had the benefit of a periodic tenancy. L served notice to quit. T refused to leave and so L applied to the court for possession using the summary judgment procedure. T argued that L had ‘waived’ the notice to quit. This failed.

First, Deputy Judge A To pointed out that a notice to quit, once served cannot be withdrawn. The parties can agree to a new lease but there was no evidence of such an agreement here:

‘Technically, a notice to quit, once given, cannot be waived unilaterally by the party giving it. Even according to the evidence of the Defendant, the Plaintiff never expressly waived the notice to quit in the sense that it withdrew the notice. Instead, the documentary evidence consistently shows that the Plaintiff insisted on the notice. To the extent that “waiver” is used as a convenient misnomer, it requires the consensual agreement of the parties that the tenant remains in possession. As with any agreement in respect of disposition of interest in land, four certainties apply, namely certainty of parties, property, term and price. Even on the evidence of the Defendant there was no agreement as to the term of the new tenancy and the rental. The so called defence of “waiver” does not even get off the ground.’ ([13])

The possibility that the landlord might be estopped from relying on the notice was considered but there was no credible evidence of a representation that the notice would not be relied upon. L sought summary judgment but before a court would be persuaded that a full trial was necessary, T would need to ‘show that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief.’ ([16])

T had not succeeded in this.

Michael Lower

Periodic tenancy: Government’s right to resume possession for a public purpose

In Attorney-General v Sun Lee Godown Co Ltd ([1968] HKLR 116) the Crown had granted a monthly tenancy. The agreement allowed the Crown to resume possession if it needed the land, or any part of it, for a public purpose. The question was whether the Crown retained the normal implied right to give a month’s notice to quit or whether this was displaced by the limited express right to recover possession. It was held, as a matter of construction of the agreement, that the express right was additional to, and did not displace the usual right to terminate by giving notice to quit.

Mills-Owen J. said:

‘I see no reason to infer a bargain whereby the Crown relinquished the right to give notice to quit in exchange for clause 3(f). Further, if I had been of the opinion that clause 3(f) operated, whether by way of inferred bargain or otherwise, to deprive the Crown of the right to give the usual month’s notice to determine the monthly tenancy, I would have held it to be void as repugnant to the nature of the tenancy expressly created. It would be clearly so repugnant, in my view, as amounting to complete in consistency with the incidents of a monthly tenancy. It would be not a mere added condition, or a mere regulation of the conditions on which notice to quit might be given by the landlord. On the contrary, in my view it would have been a provision depriving the landlord of the right to determine the tenancy by a means inherently incident to the nature of the tenancy expressly created, namely by notice to quit. It would have amounted to an attempt to change the nature of the monthly tenancy, by destroying an essential incident of such a tenancy, not merely to regulate the length of notice or the terms on which it might be given. It would not be a question of regulation to a degree but of complete abrogation of the right to give notice. That in my view would necessarily be repugnant to the nature of the tenancy.’

Michael Lower