Staying on

What happens when a fixed term tenancy comes to an end and the tenant remains in occupation?

What happens when a fixed term tenancy comes to an end and the tenant remains in occupation? Are things made worse if the landlord charges rent on the same half yearly basis as before? Where development is on the horizon, many landlords will grant a farm business tenancy of no more than two years so as to be able to give short notice to obtain possession and avoid the minimum of one year applicable in the case of longer tenancies. It is all too easy to overlook the expiry of the fixed term and to charge the next half year’s rent. The question is whether this creates a new annual tenancy and therefore frustrates the landlord’s ability to recover the land at short notice.

Although the case of Erimus Housing Ltd v Barclays Wealth Trustees is a case relating to business premises, it deals with the same general principles which would apply if a tenant was to stay in possession under a farm business tenancy.

If a tenant does not vacate at the end of a lease then there are three options. If he stays there without the landlord’s consent, then he is a tenant at sufferance and has no security. If he stays with the consent of the landlord then he will be either a tenant at will, (again no meaningful security of tenure), or a periodic tenant which may bring in to play the need for statutory as well as common law notices. A landlord who hopes for early possession does not want to create a periodic tenancy.

The good news from the Erimus case is that the payment of rent gives rise to no presumption of a periodic tenancy. The crucial distinction is the existence or otherwise of ongoing negotiations between the parties. If the next stages are still under discussion then a tenancy at will is likely to be inferred. If the tenant is there with landlord’s consent but there are no negotiations then a court is likely to rule in favour of a periodic tenancy.

Clearly the best thing for a landlord at the end of a fixed tenancy is to regain possession or grant another tenancy. The next best thing is to pursue negotiations with the tenant actively and to insist on possession as soon as they break down.

If all goes wrong and the landlord is faced with a periodic tenancy, he will want to know what kind of tenancy it is (whether, say, half yearly or yearly). The answer is to be found in the period by which the rent is calculated rather than the frequency of the payment.

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