Over Taylor Biggs

The length of the tenancy can be a material issue, particularly if the premises are to be put to business use.  Under the Landlord & Tenant Act 1954, if the tenancy is granted for more than six months and is a fixed term, the parties can agree that the Act will not apply.  A Landlord is therefore entitled to the premises back, without having to establish one of the prescribed grounds and to pay compensation.  The Act specifies that a tenancy for fewer than six months is not protected by the Act and the statutory consequences will not apply.

Problems can arise when an initial tenancy for fewer than six months is extended, or, where the tenant remains in occupation.  These difficulties were encountered in 2004 with premises close to Heathrow Airport and the matter ended up before the Court of Appeal. 

Developers of affordable housing granted a three month tenancy to a Mr Roberts.  The future of the redevelopment was uncertain so the Tenancy Agreement stated that if the tenant held over after the three months, the letting could then be determined on not less than one week's notice.  Mr Roberts paid the rent until he disappeared in 2006.

It was then discovered that in breach of covenant, he had allowed others to occupy various parts, under a variety of leases granted in 2005.  One lease was for eight years and another for ten years.  Both tenants had improved the buildings and had agreed to accept full repairing obligations.  Businesses had been generated, with valuable goodwill.

In 2009, the Developers sought possession.  Those in occupation claimed they were business tenants and therefore entitled to the protection of the 1954 Act.  It was common ground that the occupiers could not have any better rights than those of the original Landlord, Mr Roberts.  What therefore happened, as a matter of legal principle, when the fixed term tenancy for three months expired?

The Court of Appeal felt there was no ground to challenge the earlier Court's decision that Mr Roberts became a tenant at will when the three months expired.  The same position therefore befell the occupants.  They were also tenants at will.  They did not enjoy any protection from the Act. 

 It is well established that where a tenant is allowed into possession, or a formerly contracted-out tenant is allowed to remain in occupation, the Courts will not readily assume that payment of a rent gives rise to a periodic (ie protected) tenancy.

 Some disquiet has been expressed about the decision because the tenancy in question contained express provisions for the giving of notice if the period went beyond three months. Normally, prescribing a period of notice is fatal to a tenancy at will.  Provisions for giving of notice suggest a periodic tenancy.  However, the Court of Appeal felt otherwise. 

 The best advice is to let premises even on a short term basis on a fixed term tenancy of more than six months and to exclude the 1954 Act.  With agreement, such a lease could contain a Landlord's break option.  The Landlord will have the comfort that if the fixed term tenancy expires and the tenant remains in possession, the Courts are, perhaps more readily than was thought the case, prepared to recognise that this gives rise then to a tenancy at will and not a protected periodic tenancy.