What is holding over?
Holding over is simply a tenant remaining in occupation of premises once the original term of their letting has come to an end.
Holding over – the risks
Holding over principally presents risks as a result of the lack of clarity on the legal position of the parties that it creates. Where a tenant is allowed to hold over at the end of a lease with the permission of the landlord there are two main situations that might arise. The first is that a tenancy at will is created and the second is that the parties inadvertently create a periodic tenancy.
A periodic tenancy
Where a periodic tenancy is created there are issues where the former lease was contracted out of the Landlord and Tenant Act 1954 Part II as the new lease will be covered by it, meaning that certain provisions with respect to factors such as statutory notice will apply if the landlord wishes to gain possession. If an assumption is made by the parties that the circumstances constitute a tenancy at will and proper notice is not given then the usual sanctions can be applied.
Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Ltd
A case that highlights this very well is that of Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Ltd. This concerned the classic situation of a tenant holding over on the lease with the permission of the landlord in order to carry out negotiations on a lease for a new property. The original lease (which was excluded from the 1954 Act) expired in October 2009 and the tenant stayed in the property whilst discussing terms for a new lease with the landlord.
In August 2011, after on and off negotiations, the tenant notified the landlord that it had decided it needed a larger property and would be leaving. The suggestion was made by the tenant that it be allowed to hold over until a new lease could be negotiated and three months notice was given when the tenant found a new property.
An annual periodic tenancy
As the rent in this case was payable annually the landlord claimed that it was entitled to six months notice, on the basis that the tenancy was an annual periodic tenancy. If the circumstances had indicated a tenancy at will then this would not have been the case and the three months notice provided by the tenant would have been enough, as a tenancy at will can be determined (ended) summarily at any time.
However, the judge found that a tenancy at will had only existed on the day after the original tenancy ended. The issue was that there were ongoing negotiations concerning the tenancy but that these lasted some considerable time and the arrangement between the two parties began to seem like a permanent arrangement. It was also key that the tenant gave notice when it decided it wanted to move to new premises. This would not have been required if there was a tenancy at will but was the only way the tenancy could have ensured a right to stay in the property until it was ready to leave - this was behaviour that indicated a periodic tenancy. If the tenant had been asked to leave before it was ready it would most probably have claimed a protected periodic tenancy and so the judge found the circumstances indicated an annual periodic tenancy.
The lesson…
It is never a good idea to assume a tenancy at will – it is far better to have clarity in writing with an express tenancy.