A recent case reminds landlords to take care when allowing tenants to occupy premises outside of the term of a formal lease.
There is a presumption at law that a tenant who remains in occupation after the expiry of a fixed term tenancy occupies on the basis of a tenancy at will. This is terminable at the will of either party (ie, without notice) and a business tenant occupying on this basis will not have security of tenure under the Landlord and Tenant Act 1954. This presumption can only be rebutted by an alternative contractual arrangement between the parties, for example, a periodic tenancy which is terminable on notice and does attract security of tenure under the 1954 Act.
This case concerned a three-month fixed-term business tenancy which provided that, if the tenant held over after the expiry of the fixed term, the "hold over" tenancy would be terminable on not less than one week's notice by either party.
The court held that the express ability to terminate in the holding over period on one week's notice was neither inconsistent with, nor rebutted, the presumption that such occupation was on the basis of a tenancy at will. Allowing a tenant a reasonable period to vacate premises upon termination of a tenancy at will is usual practice, so one can see why the seven day period was held not to displace the presumption.
However, the decision in this case should be relied on with caution. For a landlord, the key is to ensure that any holding over is on the basis of a tenancy at will (to avoid a business tenant enjoying security of tenure under the 1954 Act), and it remains best practice not to provide for termination on notice in an express tenancy at will.
Katana v Catalyst Communities Housing Limited (2010)