Most commercial landlords will be aware of the Landlord & Tenant 1954 Act (“1954 Act”) procedure. Many will also be aware that when a section 25 or section 26 notice is served in accordance with the 1954 Act the parties have until the termination date stated in the notice to:
Otherwise the tenant loses their security of tenure and right to issue a claim at court for a new lease.
However, commercial landlords may not be aware of the position when a tenant stays in occupation following expiry of the section 25 or 26 notice – it is not a common position, primarily because and most tenants would wish to avoid that situation at all costs.
A tenant who stays in occupation following expiry of a 1954 Act notice, or at the end of the term for a lease which is contracted out of the Act, could continue to occupy the property on the basis of a number of different types of tenancy.
Whether a periodic tenancy has arisen will depend on several factors and depends on the facts of each case. Typical factors indicating this type of tenancy is in place are:
The terms of the periodic tenancy are determined by reference to the expired lease, save where there is evidence of a different intention. In particular, the duration of the periodic tenancy will be determined by reference to how the rent is paid under the expired lease.
The key aspect of a periodic tenancy is that the tenant is likely to be a protected tenant under the 1954 Act and the periodic tenancy can only be terminated by following the procedures set out in the Act. This is particularly concerning for a landlord if they want to retain the right to ask the tenant to leave, as under the 1954 Act the landlord could only oppose granting new tenancy under the Act’s specified grounds.
Tenancy at will
Typical factors pointing to this type of tenancy are:
The key feature of a tenancy at will is that it can be terminated by either party, at any time, and on immediate notice. This may be preferable for a landlord who wishes to keep control over the tenant’s occupation of the premises and to retain the ability to ask them to leave should negotiations for the new lease fail. If the landlord prefers this type of tenancy whilst a new lease is yet to be entered into the landlord should take advice on entering into a written tenancy at will which will govern the tenant’s occupation until the new lease is completed.
Tenancy on sufferance
A tenancy on sufferance arises when:
In this situation the landlord may commence possession proceedings without any previous demand for possession. However if the landlord consents to the continued occupation then the tenant could have acquired a tenancy at will or even a periodic tenancy if it has remained in occupation for some time. That consent could be given in writing, verbally or implied by way of the landlord’s conduct.
Whilst not a type of tenancy, the remaining possibility is that the tenant will be held to be a trespasser. This can occur where the landlord has made clear to the tenant that it does not give consent for it to remain in occupation after the expiry of a 1954 Act notice. In those circumstances, the tenant is likely to be regarded as trespassing on the property and the landlord would be entitled to seek a possession order at court to recover possession of the premises.
Whilst tenancies on sufferance and trespass give the landlord the greatest control over recovering possession of the premises, there will undoubtedly be commercial considerations for the landlord to consider, including the ease with which the premises can be let out if/when the current tenant is removed. Landlords should also note that if they want to preserve their right to recover the premises under a tenancy on sufferance or the doctrine of trespass, it would be necessary to put a rent stop in place following expiry of the lease or 1954 Act notice. That is particularly important if the premises are an essential source of income.
The suitability of the above tenancies and arrangements will depend upon the landlord and their circumstances. However, in every case it is clear that all landlords should act quickly and decisively should their tenant stay in occupation beyond the expiry of the term within a contracted out lease or a 1954 Act notice without a formal lease or court application. If the end of the term or expiry of the notice is approaching, landlords should seek advice on the terms of the existing lease and confirm whether there are any obligations relating to dilapidations and other requirements that need to be satisfied before the lease ends.
For more information on any of the above, or how we can help you, please contact Sara Malik, or call 0191 232 8345.