Once the term of a lease has expired the situation can become
complicated where
a tenant remains in occupation. The complexity will depend on
whether the lease is a "protected lease" under the renewal
provisions of the Landlord and Tenant Act 1954.
What is a protected lease under the Landlord and Tenant
Act 1954?
Under the statutory provisions of the Landlord and Tenant Act
1954, a protected lease gives a tenant security of tenure - a right
to remain in occupation of the property upon expiry of the lease.
Obligations under the lease remain the same and a landlord is
entitled to the same rent together with any monies due under the
terms of the lease.
The Landlord and Tenant Act 1954 allows a tenant to determine
the lease at any time once the contractual period has expired with
the only stipulation being that the tenant must give the landlord 3
months written notice.
Should a landlord oppose the grant of a new lease it is,
unfortunately, not so simple to end a protected lease. In order to
terminate the lease, you will need to serve notice on the
tenantandprove one of the specified grounds within Section 30(1) of
the Landlord and Tenant Act 1954. However, should you be successful
in opposing a new lease and prove one of the specified grounds to
regain possession of the property, a tenant can claim compensation
from you depending on the ground on which you oppose to a lease
renewal. Compensation will be calculated on the rateable value of
the property.
What if the lease is not protected under the Landlord
and Tenant Act 1954?
If a Landlord does not wish to grant the tenant a lease with
security of tenure then the new lease must be excluded from the
renewal provisions of the Landlord and Tenant Act 1954. To effect
this the Landlord serves a notice on the tenants before the grant
of a lease stating that the lease will be excluded from the
Landlord and Tenant Act 1954 and relevant provisions should be
drafted into the lease. This procedure is known as "contracting
out".
It is becoming more common for landlords to grant a new lease
which is contracted out of the Landlord and Tenant Act 1954 and in
these circumstances a landlord should ensure that all necessary
action is taken to prevent the tenant remaining in occupation
without the grant of a new lease.
Steps to take:
First and foremost a landlord should try and establish the
tenant's intention regarding the property upon expiry of the lease.
This should be determined several months before the lease is due to
expire in order to ensure that there is adequate time for
negotiations to take place if a new lease is to be entered
into.
If negotiations are not entered into by a tenant before the
lease expires the landlord should issue an open letter to the
tenant demanding possession of the property upon expiry of the
lease. Where a landlord does not oppose the grant of a new lease
then a separate letter should be sent to the tenant which should
state that they do not intend to issue proceedings at court until a
specified time has expired. This gives the tenant a short period to
enter negotiations should they wish to remain at the property.
In the event that negotiations for a new lease takes place once
the lease has expired then it is generally agreed that a tenant
remains in occupation under a tenancy at will which grants the
tenant a short term occupancy whilst negotiations can take place.
The tenancy can be terminated if terms of a new lease cannot be
agreed.
What if negotiations do not take place and the landlord
doesn't demand the premises to be returned?
The easiest thing for landlords to do in this situation would be
for them to continue demanding rent - if the tenant wants to stay
then they should pay, what harm can it do?
If a tenant remains in occupation after the expiry of a lease
without security of tenure then the landlord runs the risk of the
tenant occupying the property under a periodic tenancy. This will
make it harder for a landlord to regain possession of the property
and potentially give the tenant a right to a lease renewal under
the Landlord and Tenant Act 1954. As a result, if you oppose a new
lease and you want to repossess the property then you will need to
serve the appropriate notice under section 30(1) of the Landlord
and Tenant Act 1954. If you continue demanding rent after the
expiry of the lease, and the longer the situation continues without
a formal agreement in place, then the more likely it will be that
the continued occupation by a tenant of an expired unprotected
lease will be deemed to be a periodic tenancy.
Conclusion
Where a lease is contracted out of the provisions of the
Landlord and Tenant Act 1954, the actions of a landlord on the
expiry of the lease term plays a vital role in whether security of
tenure will be created. To allow a tenant to continue occupation
and demanding rent from the tenant is likely to result in you
granting the tenant a right to remain in occupation under the
Landlord and Tenant Act 1954. Therefore, you will be required to
end the lease by proving one of the specified grounds under section
30(1) of the Act and, if successful, compensation can be claimed by
the tenant.
If you are a landlord and your current lease is contracted out,
it is important that it is established as early as possible what
the tenant's intentions are at the expiry of the term. This will
then ensure that you can make it clear to the tenant whether you
are willing to negotiate a new lease or obtain vacant possession of
the property on expiry of the lease.