Between a Rock and Hard Place
26th Feb 2009
Adam Wood, Solicitor in the Commercial Property team gives guidance to those coming to the end of their lease term.
The time after the end of a lease on commercial premises is an important one for both tenant and landlord.
After the term of a lease has expired, it is not unusual for the tenant to remain in occupation while a new lease is being formalised. This is often welcomed by the landlord who is usually anxious to preserve a rental income while the lease is being renewed.
However, if rent is demanded and accepted by the landlord, a new tenancy may be created automatically and unintentionally.
This is not an issue for tenancies that have the full protection of the Landlord and Tenant Act 1954, but problems may arise where tenancies are not so protected.
In a recent case, the tenant was allowed into occupation while the terms of a lease were being negotiated.
The tenant paid £2,500 to the landlord as rent for three months. A year later a lease was still not in place and the landlord wanted possession of the premises. The court confirmed that, although the payment of rent was an important factor, it was only one of a number of factors that should be taken into consideration.
The court decided that no tenancy had been created but that the tenant was a tenant at will, meaning that the relationship between the tenant and the landlord could be ended by either party at any time.
This shows that the creation of a tenancy will depend upon the conduct and intention of the parties.
Landlords should be cautious about demanding and accepting rent from tenants following the expiry of a lease.
However, if landlords take no action they obviously risk depriving themselves of an income stream, which in the present economic climate is not a viable option. The sensible approach is for a landlord to expressly agree with their tenant that they can occupy as a tenant at will whilst terms of a new lease are being negotiated.
It is a good idea to record this agreement in writing between the parties’ solicitors so that both tenant and landlord are in no doubt as to their rights.
* Adam Wood is a solicitor in the Commercial and Agricultural Property Team at BHP Law. He can be contacted on (01325) 466794.
Author: Adam Wood, Solicitor (AdamW@bhplaw.co.uk)
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