What is the position when a commercial tenant remains in occupation of a property, with consent of the landlord, after its lease, which was excluded from the Landlord and Tenant Act 1954 (the “Act”), has come to an end?

We are often asked on what basis a tenant occupies a property in this circumstance, whilst consent has been granted by the landlord for the tenant’s continued occupation. Depending on the surrounding circumstances, the tenant may be occupying the property as a tenant at will or as a periodic tenant. The landlord and the tenant’s rights will differ depending on what basis the tenant occupies the property. It is therefore important to establish the occupation type!

If the tenant continues to occupy the property without the landlord’s consent, the tenant will be deemed to be a trespasser, and the provisions below will not apply.

What is a tenancy at will?

A tenancy at will is a flexible, informal and non-permanent arrangement made between a landlord and tenant. A tenancy at will allows a tenant to occupy a property with the landlord’s consent for an indefinite period. There is no fixed term, and the tenancy can therefore be terminated immediately by either party at any time, without giving the other party notice. A tenancy at will is often used as a temporary solution, such as during negotiations for a formal lease renewal.

What is a periodic tenancy?

A periodic tenancy is an agreement made between a landlord and tenant with no fixed end date. It runs on a rolling, continuous basis, typically running from week-to-week or month-to-month. The tenancy continues automatically after each period expires until either the tenant or landlord serves a valid notice to terminate it. This offers flexibility for both parties compared to a fixed term lease.

If a tenant remains in occupation of the property, the tenant is likely to have a tenancy at will to begin with at least. The longer the tenant’s occupation continues, the stronger the tenant’s position will be that it may then be occupying under an implied periodic tenancy.

What will be considered?

When considering on what basis a tenant is occupying a property with the landlord’s consent after expiry of a contracted-out lease, the following will be relevant:

1. What were the contractual intentions of the parties when looking objectively (what would have been in the mind of a reasonable person at the time) at all the relevant circumstances?
2. Are the parties in the process of negotiating a new lease?
3. Has the landlord demonstrated a desire to recover possession of the property?
4. Is the landlord accepting rent from the tenant? If so, is that due to a mistake of fact?
5. Are there ongoing lease negotiations with a third party?
6. How much time has passed since the lease expired?

All the factors listed above must be taken into account when determining how a tenant occupies a property. Each scenario will be unique.

Why does it matter?

Without establishing how a commercial tenant is occupying a property, issues may arise for both the landlord and tenant, including:

1. The question of how either party can terminate the tenancy, if at all, and what is required to serve a valid termination notice.  
2. The terms upon which the tenant is occupying the property and the obligations of both parties to the agreement.
3. Periodic tenancies cannot be contracted out of the Act which could result in tenant’s gaining statutory rights to renewal without the landlord’s agreement.

Determination of a tenant’s occupation, therefore, requires careful consideration of all the relevant circumstances and facts of the case. Please get in touch if you have any questions in relation to the scenarios mentioned above.