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When a lease comes to an end, what should the parties do? Is the tenant still a tenant, or do they no longer have a right to occupy the premises?
These questions require an analysis of the type of lease (if any) that was put in place documenting the occupation.
Analysis of the type of lease
Certain tenants occupying premises for a business have the protection of the Landlord and Tenant Act 1954 (“the Act”), which means that on the expiry of the contractual term, they have a statutory right to a new tenancy. These tenancies (and the tenant’s right to occupy) will only end if the landlord terminates the tenancy in the manner prescribed by the Act.
However, not all tenants occupy under protected tenancies. For example:
- In some cases, the parties will “contract out” of the Act, which means the lease (and the tenant’s right to occupy) will end on the contractual expiry date.
- In other cases, the parties will not have put any documentation in place at all.
In these cases, a tenant could be occupying under an “implied periodic tenancy” or as a “tenant at will”. These forms of occupation have important ramifications as if a tenant is found to be occupying under an “implied periodic tenancy”, they may ultimately acquire the protections of the Act. Importantly (and as stated above), a landlord will have significant difficulties terminating such periodic tenancies.
Valley View Health Centre and others v NHS Property Services Ltd
In the recent case of Valley View Health Centre and others v NHS Property Services Ltd, several GP partnerships sought a declaration as to whether their landlord was entitled to recover the costs of recovering services. Whilst the Courts dismissed those applications, they did give a detailed analysis of the status of the partnerships’ occupation.
In the first case, the partnership’s occupation had never been documented. The partnership had been in occupation since 2007.
Previous case law has indicated that where a tenant has had such a long period of undocumented occupation, that occupation will be on the basis of an implied periodic tenancy. However, in this case, the judge said that the law had to imply “from anything which was agreed and from all the surrounding circumstances, those terms which the parties are to be taken to have intended to apply”.
The judge found that the fact that there had been negotiations from 2007 to 2011 concerning the grant of a formal lease meant that a tenancy at will had arisen rather than an implied periodic tenancy. This was despite the fact that there were considerable delays and gaps in negotiations.
Tenancy at will
The judge said that in considering whether a tenancy at will was in place, there needs to be an assessment of whether the parties both intended that the occupation of the premises should only continue at the will of the parties, and there did not need to be ongoing negotiations for a tenancy at will to exist.
In effect, if both parties intended a new lease to be put in place on terms to be agreed upon, then a tenancy at will should be inferred. In this case, the judge was also persuaded by the fact that the parties had intended any new lease to be contracted out of the Act.
In the second case, the partnership had occupied under a 15-year lease which was contracted out of the Landlord and Tenant Act 1954. This expired in 2019. Negotiations for the new lease completely broke down before the contractual lease expiry due to a dispute regarding service charge. However, the judge found that the tenant occupied as a tenant at will as both parties had the intention throughout that a new contracted-out tenancy would ultimately be granted.
This is an important case for both landlords and tenants. From a tenant’s perspective, occupation as a tenant at will is precarious as the landlord can determine the tenant at will at any time. From a landlord’s perspective, this case implies that it is very difficult for a tenant to obtain security of tenure where their occupation has not previously had that protection. However, we would urge landlords and tenants to obtain legal advice in these scenarios as the legal position is very fact dependent.