Rights of Tenant when Lease ends – Surprise Decision

The Court of Appeal has issued a surprising judgment regarding the nature of a tenancy after the lease has expired.

A tenant was granted a three-month lease, which contained a clause that, after that period, the lease was terminable on either side by giving one week's notice. The tenant later granted sub-leases to two other tenants - one purporting to be for eight years and one for 10 years.

The question later arose as to the validity of the leases the tenant had granted to his sub-tenants. The landlord argued that after the expiry of the tenant's lease, he was a tenant 'at will', and thus a week's notice was sufficient to recover the premises, because the tenant could not pass better title than he himself possessed.

The subtenants argued that a 'periodic tenancy' had been created, because the tenant who was their landlord had paid the rent and this had been accepted after the expiry of the lease. If this were the case, then the tenant had the right to create sub-tenancies - although these would not have been for the eight- and 10-year terms agreed, but on the same terms as the tenant landlord's periodic tenancy.

Only in special cases does a short-term tenancy have the protection afforded to longer tenancies under the Landlord and Tenant Act 1954. The subtenants therefore were arguing that they were protected under the Act and the landlord that they were not.

It needed the Court of Appeal to decide the issue. To the relief of many landlords, it ruled that the clause which allowed the tenant a week's notice at the end of the lease was not inconsistent with the concept of a tenancy at will and therefore the tenant and subtenants did not have the protection of the Act.

This decision runs counter to that in an earlier case on the same issue. The received wisdom on the subject had been that in a case in which a notice period is specified after the lease term has expired, a tenancy at will is not created.

'Although landlords will be happy with this decision, the safer option may be to make sure that a lease does not specify a notice period if the tenant remains in occupation after its expiry,' says Cindy Rai.

For advice please contact Cindy Rai