When a tenant continues to occupy a property after its lease has expired and the lease does not benefit from security of tenure under the Landlord and Tenant Act 1954 (“1954 Act”), this is known as ‘holding over.’
Holding over may create a new tenancy, or it may be considered a trespass. These outcomes can lead to uncertainty and adverse consequences to both parties which can be costly to resolve. Therefore, ‘holding over’ should be avoided where possible.
How to avoid holding over?
In the months prior to the expiry date…
Well in advance of the expiry date, the parties should discuss their intentions. If the tenant indicates that it would like to remain at the property, negotiations should commence, and solicitors be instructed with sufficient time to document any new lease.
In the weeks prior to the expiry date…
If it is still not known whether a new lease will be entered into, the landlord’s solicitor should write to the tenant demanding possession of the property upon expiry of the lease. If the landlord wishes to enter into a new lease, the landlord’s solicitor can send separate communication to the tenant, on a without prejudice basis, stating that possession proceedings (see below) will not be issued for a short period of time to allow negotiations for a new lease to continue. A tenancy at will (see below) can be considered in the interim before a new lease has been agreed.
After the expiry date…
Landlords (including its agents) must not demand or accept any payment from the tenant and a rent stop should be put in place. Landlords must also not indicate to the tenant that the lease is continuing in any way. To seek to recover possession of the property, the landlord should write to the former tenant stating that it is occupying the property as a trespasser and that vacant possession is required immediately. If the landlord wishes for the tenant to remain and/or has accepted rent after the lease has expired, a tenancy at will (see below) should be agreed in writing between the parties as soon as possible to avoid creating a periodic tenancy (see below).
Risks of holding over
If the tenant has stayed in occupation and paid rent after the lease has expired, the parties could inadvertently create an implied periodic tenancy which has serious consequences.
What is a periodic tenancy?
A periodic tenancy can be created by express agreement or by implication, where there is a landlord and tenant relationship, and rent is demanded and paid by reference to a particular period. It is a rolling tenancy with no fixed end date, and the tenant has rights under the 1954 Act meaning it will have a statutory right to a new tenancy and to remain at the property. Terminating a tenancy that is protected by the 1954 Act is complicated and involves giving a minimum of 6 months’ notice and a specific reason for termination.
What is a tenancy at will?
A tenancy at will can be created expressly or by inference and exists where there is a tenancy on terms that either party may terminate at any time. Tenancies at will do not give the tenant the right to a lease renewal under the LTA 1954. This is beneficial to landlords wanting some flexibility as they can grant a temporary short-term tenancy that is easy to terminate. However, in the alternative, the tenant can be evicted at any point with little notice if a new lease is not entered into.
Re-entry and possession proceedings
If the tenant does not vacate on the lease expiry, the landlord can attempt to re-enter the property and change the locks; however, landlords should seek legal advice before doing this as caution is needed and a strict process must be followed including in how to deal with the tenant’s stock. Landlords may also start court proceedings for possession and again legal advice is strongly recommended. As well as a possession claim, landlords may also bring a damages or “mesne profits” claim which is based on the rental value of the property. Landlords may also claim double the yearly rent if they have given notice in writing demanding possession. Proceedings can therefore be costly for the tenant if the landlord is successful, but it also incurs time and costs for the landlord and delays recovery of possession of the property.
Conclusion
The risks and consequences of holding over can be serious and costly. Even if the landlord and tenant have a good relationship, it is important to consider the lease expiry early and, if necessary, agree and document the tenant’s continued occupation at the property, again in advance of the expiry date.
This article originally appeared in Petrol Heads Up.