Solicitor Lauren Johnson, in our Dispute Resolution team, explains how landlords can deal with tenants who continue to occupy commercial premises following the end of a contracted out lease.
A lease that has been contracted out of the Landlord and Tenant Act 1954 will end at the conclusion of the fixed term.
For an overview of what security of tenure is see our earlier blog article ‘Security of tenure and contracting out in commercial leases – what does this mean?’
A landlord will not be required to serve notice to bring a contracted-out lease to an end. Prior to the fixed team lease coming to an end, the landlord should consider contacting the tenant in appropriate time to determine the tenant’s intentions.
If the tenant indicates they wish to renew the lease, the landlord and tenant can enter into negotiations for a new lease.
If the landlord is not clear on the tenant’s position, or that a new lease will be entered into, the landlord should consider if it is necessary to formally write to the tenant demanding possession of the property upon expiry of the term lease.
The status of a tenant following expiration of a contracted-out lease
The status of a tenant who has remained in occupation of a property following the expiration of a contracted out commercial lease can be uncertain. It is likely the tenant’s occupation will be one of the following:
1) A trespasser
A tenant is likely to be a trespasser if they have remained in occupation of the property following expiration of a fixed term contracted out lease and there is no other agreement to the contrary.
2) A tenancy at will
A tenant is likely to be a tenant at will if there is an agreement between the parties, usually in writing, which is not a periodic tenancy or for a fixed term.
A tenancy at will can be created expressly or by assumption, usually on the terms that either party can end the tenancy at any time.
A tenancy at will is not protected by the LTA 1954 and does not give a tenant security of tenure or the right to a lease renewal under the LTA 1954.
3) An implied periodic tenancy
A tenant may be occupying the property on periodic tenancy if the tenancy term if for a period of time such as weekly, monthly, quarterly or yearly. The tenancy lasts until ended by either the landlord or the tenant.
A periodic tenancy can be created by express agreement or may be inferred by conduct between the landlord and tenant.
If a tenant is occupying a commercial property under a periodic tenancy the tenant will have security of tenure under the LTA 1954.
Tenancy at will or periodic tenancy?
If a tenant remains in occupation of the property at the end of the fixed term contracted-out lease, they will be a trespasser. However, as time goes on, a tenancy at will or a periodic tenancy could be created.
There are several factors which may be considered to determine if a tenancy / lease is a tenancy at will or a periodic tenancy, including:
- Whether the landlord has taken steps to recover possession
- Ongoing payment of rent by the tenant and acceptance by the landlord
- Ongoing negotiations for a new lease
The landlord should be careful not to create a new lease by their conduct, following the end of a contracted out fixed term lease. If a tenant remains in occupation, then it is important the landlord is pro-active in seeking negotiate a new lease or to recover possession of the property.
Our Dispute Resolution team can advise on property related disputes.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
