The recent case of Erimus Housing Ltd v (1) Barclays Wealth Trustees (Jersey) Ltd (2) Wallbrook Properties Ltd (as Trustees of the Centre Unit Trust) [2014] EWCA Civ 303 overturned a previous decision that the prolonged negotiation of a renewal lease, in this case for 16 months, brought into effect an implied periodic annual tenancy. It was held that only a tenancy at will existed and was therefore not protected by the Landlord and Tenant Act 1954 (the “1954 Act”).

The tenant was granted a lease of premises for a term of five years, expiring on 31 October 2009. The lease was contracted out of the provisions of the 1954 Act.

When the lease expired, the tenant remained in occupation paying the same rent, service charge and insurance as it had under the expired lease. At the same time, the landlord and tenant sought to negotiate the terms of a new lease. When, ultimately, no lease was granted and instead a new property became available, the tenant decided to vacate and gave notice to the landlord in May 2012. The landlord challenged the notice saying the tenant could not terminate such tenancy except by at least six months’ notice: meaning the earliest it could terminate was October 2013. The tenant argued it had a tenancy at will, so could vacate at any time.

The Court of Appeal agreed. There was nothing from which one could derive any agreement or understanding about the tenant having security of tenure for a specific period of time. The parties were simply negotiating for a new lease, and the tenant had stayed in the premises in anticipation of that event. Where a party holds over after the end of the term of a lease with consent, he becomes at the very least a tenant at will and his continued payment of the rent is not inconsistent with his remaining a tenant at will even though the rent reserved by the former lease was an annual rent. The payment of rent gives rise to no presumption of a periodic tenancy. The fact that the former lease was contracted out of the 1954 Act and the newly negotiated lease was also to be contracted out, gives extra force to the understanding that parties did not intended to create a periodic tenancy.

This decision of the Court of Appeal is to be welcomed in clarifying the status of a tenant who remains in occupation after expiry of its lease whilst it negotiates new terms. It is clear that providing negotiations are continuing (even if they are protracted) and rent is being paid, something more is required to give the tenant statutory protection.