Tenant holds over after the end of a lease: landlords – make sure you have a paper trail evidencing negotiations

The Court of Appeal decision in Erismus Housing Ltd v Barclays Wealth Trustees (2014) deals with a common situation: a landlord grants a fixed term lease and excludes security of tenure so it can get the property back when the lease ends. When it does end, the tenant remains in occupation and pays rent. The danger for the landlord is the continued occupation creates a new tenancy with security. This arises because the landlord has let matters continue without thinking about security of tenure. 

So should a landlord never allow occupation after the end of a contracted-out tenancy? Ideally the answer is “yes”. However, matters are not as bad for landlords as that. The key for the landlord is to show that during any post lease occupation, the parties are negotiating a new lease.  If this is so, the tenant occupies as a “tenant at will”. This means the tenant is like a licensee without security.

The landlord must show “both parties remain of the intention that there should be a new lease on terms to be agreed”. Negotiations may be intermittent or fall into abeyance for periods; but this does not matter unless this is evidence that the parties have abandoned plans to grant a new lease.

Though case law is generous to landlords in this type of situation, best practice must be to regularise quickly the position of the tenant who holds over after the end of a lease. At the very least the landlord or its advisers must have a paper trail by way of evidence of the landlord’s intention to grant a new fixed lease to the tenant.