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The end of leases?

The end of leases?

Moving to new premises is expensive and disruptive for a business. This prompts many tenants to renew their leases when they expire.

If a tenant is deciding whether to stay or go, and the landlord isn’t exactly bothered by other prospective tenants, it can be convenient for both parties to let the tenant’s occupation drift on in the short term. A property lawyer would call this “holding over”.  It’s a pragmatic approach, but tenants should be aware of the risks.

As a first step, it’s critical to find out whether the lease in question has security of tenure under the Landlord and Tenant Act 1954.

The recent case of Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited [2014] EWHC Civ 303 is relevant if you don’t have security of tenure. After a lease ended the parties conducted on/off lease negotiations for over two years while the tenant stayed in the building. Shortly after heads of terms were agreed, the tenant decided it really needed somewhere much larger and nine months’ later, gave three months’ notice of its intention to leave.  The parties had to go all the way to the Court of Appeal to discover that the tenant had a “tenancy at will”. This meant the tenant could give as much or as little notice as it wanted to move out.

That was a good result for that tenant. However, the case means that landlords can ask tenants to leave on a day’s notice after the end of their lease. This is more of a risk for tenants as the property market starts to pick up. The other risk for tenants is that the cost of staying put could be very high. The Distress for Rent Act 1737 allows the landlord to charge double the normal rent if a tenant unlawfully holds over. It’s an old Act, but if the landlord follows the correct steps it still works.

In the Barclays Wealth case, the on-going negotiations for a new lease were the deciding factor in determining that the tenant could move out when it liked. Curiously, if there had been no negotiations and the landlord had accepted rent, the tenant would have needed to give a year’s notice to leave.

If the lease has security of tenure, the case doesn’t apply.  There’s a statutory procedure to follow.

The moral, for both landlords and tenants, is to plan in good time before a lease comes to an end.

By Suzanne Gill

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