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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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

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

Quarterly tenancy determinable ‘at any time’. Did the notice have to expire at the end of a quarter?

In Lai Mai-yu v The Attorney-General ([1977] HKLR 382, SC) the Crown granted T a lease for a fixed term of one year and thereafter to be a quarterly tenancy. The lease provided that ‘the term hereby created may be determined at any time by either party giving to the other not less than three calendar months’ notice in writing to that effect.’ The Crown gave three months’ notice in accordance with the lease. The notice did not expire at the end of a quarter. The Crown, by mistake, demanded and accepted rent for a period after the expiry of the notice to quit.

Trainor J. held that when T remained in possession at the end of the fixed term, it did so in accordance with the express terms of the agreement; this was not a case of an implied periodic tenancy as a result of a holding over. Thus, the notice was valid. He went on to say that even if this had been an implied periodic tenancy, it would have been impressed with the provision as to notice and that the words ‘at any time’ in that clause were enough to give validity to a notice to quit that did not expire at the end of a quarter.

Once notice to quit had been given, the lease was at an end. It could not be withdrawn. At most, the demand and acceptance of rent could have been evidence of an intention to create a new lease but the evidence did not point to this as being the intention of the parties.

Trainor J. provides a useful summary of the possible relationships that can arise when a tenant holds over:

‘Holding over simply means that on the expiration of a term the tenant remains in occupation of the demised premises. If he does so without either the consent or disapproval of the owner he is a tenant at sufferance; if it is with the approval of the owner then there is a tenancy at will. If the occupant remains with the consent of the owner and pays him rent there arises between them by a presumption of law a relationship of landlord and tenant. When the rent paid is expressed to be at an annual rate, even though payable by instalments, then the nature of the relationship is presumed to be that of a tenant from year to year and such of the terms of the expired lease as are applicable to a yearly tenancy will apply. It is a presumption, however, that is rebuttable by the circumstances. It is when rent is paid and received that the relationship of landlord and tenant is established and the nature of the relationship can be ascertained, e.g. is the occupant a yearly tenant.’

 

Michael Lower

Implied periodic tenancy on holding over? Open question in each case.

In Longrigg, Burrough and Trounson v Smith ([1979] 2 EGLR 42, CA (Eng) T refused to give up possession at the end of a fixed term. L tried to persuade T to leave and, when this failed, brought possession proceedings. In the meantime, L accepted several rent payments after the end of the fixed term. The question was whether the payment and acceptance of rent gave rise to an implied periodic tenancy.

The English Court of Appeal held that there was no presumption of an implied periodic tenancy from the fact that rent had been paid and accepted. It was an open question whether this was the right inference to be drawn from the facts of each particular case. Here there was no implied agreement that a new periodic tenancy was to arise.

Ormrod L.J. said:

‘The old common law presumption of a tenancy from the payment and acceptance of a sum in the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls over the landlord’s rights of possession, this presumption is unsound and no longer holds. The question now is a purely open question; it is simply: is it right and proper to infer from all the circumstances of the case, including the payments, that the parties had reached an agreement for a tenancy? I think it does not now go any further than that.’

Michael Lower