A client asked…
“My tenant’s lease has ended. The tenant is still in occupation and I would like him to stay and to take up a new lease, but terms have not yet been agreed. Can I demand and accept rent?”
By demanding and accepting rent, you may unintentionally create a new periodic tenancy, so caution is required. However, if you don’t take action, you risk losing income from the property, particularly if your tenant decides not to take up a new lease and vacates.
This does not apply to tenancies that have security of tenure under the Landlord and Tenant Act 1954. Unless notice is served under the Act, the tenancy automatically continues – so there’s absolutely no reason for you not to continue demanding and accepting rent.
But when the tenancy does not have 1954 Act protection, if you demand and accept rent after the lease has expired it may be inferred that the parties intended to create a new periodic tenancy – a tenancy which will potentially have the protection of the 1954 Act. However, deciding whether this inference was made is a matter of evidence.
Indeed, a different inference is likely to be drawn when a tenant is allowed to remain in occupation where the parties are continuing negotiations for the grant of a new lease. In this case, a tenancy at will may be implied.
While a tenancy at will may be created by inference from the party’s conduct, it can also be created expressly. In situations where the parties are seeking to agree terms for a new lease, the creation of an express tenancy at will provides you with certainty and the opportunity to demand rent without the risk of creating a tenancy with statutory protection.
You are entitled to distrain in the event of non-payment of this rent (at least until the remedy of distress is abolished).
While the parties are negotiating terms for a new lease, it is likely that the occupation of the former tenant will be as tenant at will. However, it will be preferable for the parties to expressly agree this to be the case, so that there is no doubt as to the rights and liabilities of the parties.