Clarity is restored on the status of held-over leases
Michael Higgin, Partner in the commercial property team, comments on the restoration of normality in cases where tenants holdover premises, the Court of Appeal decision in Erimus Housing.
Landlords, property professionals and lawyers dealing in “Landlord & Tenant” law were surprised last year by the High Court decision in Erimus Housing v Barclays Wealth. This said that a tenant who had held-over its occupation when its lease ran out had acquired a new periodic yearly tenancy and so had to give six months notice to leave, rather than immediate notice. This has now been reversed by the Court of Appeal.
To be fair to the High Court Judge, the tenant had been in occupation for almost three years before it tried to bring its occupation to an end. In a different context, where the tenant might have been trying to continue its occupation in the face of an attempt by the landlord to obtain vacant possession, the court might well reach that conclusion, to safeguard the tenant’s business interests and require the landlord to give longer notice.
However, in the Erimus Housing case it was the tenant who was trying to leave sooner rather than later. The periodic tenancy would have benefitted the landlord here, by requiring the tenant to serve a new longer notice and to pay rent for the longer period of time.
On the facts of this case it was important that the previous lease had been excluded from security of tenure and that negotiations had taken place for a new lease to be granted which also did not have security of tenure, even though the terms for that lease were finalised, but not pursued to completion. Prior to the High Court’s decision in the Erimus Housing case, there was established case law that a tenant in that context did not have security of tenure but held over as a “tenant at will” rather than a periodic tenant. However, the High Court’s deviation or distinction from that position in the Erimus Housing case has now been reversed.
One might say that this is another example of the courts “leaning” in favour of tenants rather than Landlords, but it is in line with what many property lawyers understood the case law to be and is welcomed to that extent.
What do we recommend?
When a lease which does not have security of tenure has expired and the tenant wants to stay on, both parties should apply themselves meaningfully to agreeing new terms and completing that lease.
Landlords and tenants need to make their business decisions as quickly as they can (and ideally well before the end of the lease term) so that appropriate steps can be taken to put a new lease in place on appropriate terms. In the circumstances, both parties should take advice on whether it helps their position (or not) to serve notices explicitly agreeing that a tenant’s occupation continues as “tenant at will”.