Topics: Landlord and tenant – Business premises – Tenancy – Tenancy at will
Alternative Citations:  EWCA Civ 303
Hearing Date: 18 March 2014
Court: Court of Appeal, Civil Division
Judge: Lord Justice Longmore, Lord Justice Patten and Lord Justice Christopher Clarke
Representation: Emily Betts (instructed by Reed Smith LLP) for the claimant.
Adam Rosenthal (instructed by Bond Dickinson LLP, Newcastle upon Tyne) for the defendant.
Landlord and tenant – Business premises. On expiry of a lease that had contracted out of the Landlord and Tenant Act 1954, it was held over while the parties negotiated a new contracted out lease. When the defendant tenant served notice of termination, an issue arose as to whether the held over lease had been a tenancy at will or a periodic yearly tenancy. The judge at first instance found it was a periodic yearly tenancy. The Court of Appeal, Civil Division, found that, in all the circumstances, there had been a tenancy at will.
The judgment is available at:  EWCA Civ 303
On 9 November 2004, the claimant was granted a lease of premises for a term of five years expiring on 31 October 2009. Under the lease, the claimant covenanted to pay the rent quarterly in advance on the usual quarter days throughout the term. The lease was contracted out of the provisions of the Landlord and Tenant Act 1954 so that the contractual term ended on 31 October 2009.
In 2005, the defendant landlord acquired the freehold reversion. Although the claimant and the defendant’s agent held discussions regarding the renewal of the lease, nothing was agreed.
On 15 January 2010, the claimant made written proposals regarding the terms of the new lease. Although the lease had expired, the claimant had continued to occupy the premises and pay rent. In November, the claimant wrote to the defendant’s new managing agent stating its intention to hold over under the terms of the original lease and continue to make the rent and other payments on the due dates. The claimant also queried whether there would be any progression in the terms of the lease documentation.
On 15 June 2011, the parties confirmed that they had agreed terms for a contracted out lease, however, it was not executed as planned. On 26 August, the claimant confirmed to the agent, having already informed the defendant, that it wished to vacate the premises.
On 30 May 2012, the claimant sent the agent a letter asking them to accept it as intention to vacate and end the tenancy on 31 August. On 21 June, the claimant’s solicitor served notice terminating the lease. A dispute arose between the parties as to whether the claimant’s notice or the notice served by the solicitor had been effective to end the tenancy which had held over after 2009. if the legal effect of the arrangements had been to create a tenancy at will on the same terms, then it was common ground that the notice given on 21 June had been effective to terminate the tenancy on 28 September 2012.
However, if, as the defendant contended, the claimant had held over under a periodic yearly tenancy which could not have been terminated except by at least six months’ notice served to expire on 31 October 2013. The defendant issued a Pt 8 claim seeking a declaration that the claimant had continued to occupy the premises after 31 October 2009 under an annual tenancy. The deputy judge decided that the parties had created a new yearly tenancy of the premises which could not have been terminated before 31 October 2013. The claimant appealed.
The appeal would be allowed.
The most obvious and most significant circumstance in the instant case was the fact that the parties were in negotiation for the grant of a new formal lease. In those circumstances, the obvious inference was that the parties had not intended to enter into any intermediate contractual arrangement inconsistent with remaining parties to ongoing negotiations. In the landlord and tenant context, that would, in most cases, lead to the conclusion that the occupier remained a tenant at will pending the execution of the new lease. The inference was even stronger when any periodic tenancy would carry with it statutory protection under the 1954 Act which could be terminated by the tenant agreeing to surrender or terminating the tenancy by notice to quit. That was given additional force in the instant case by the fact that the intended new lease was to be contracted out. The ongoing negotiations, although slow, had not been abandoned. That was not consistent with the creation of a yearly tenancy in advance of the grant of a new lease or, in particular, with one that would be protected under the 1954 Act. Further, the view that a yearly tenancy had arisen was inconsistent with the claimant’s expressed intention to vacate. Its suggestion to hold over on the same terms had contemplated no change in its status in the interim, which was that of a tenant at will. The defendant’s acceptance of that proposal could not carry with it an implication of a protected yearly tenancy (see , , , ,  of the judgment).
Javad v Aqil  1 All ER 243 applied.
Decision of John Jarvis QC  EWHC 2699 (Ch) reversed.
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