Walji & Ors v Mount Cook Land Ltd

Whether a periodic tenancy arises depends on the parties’ intention inferred from what they agreed and all the surrounding circumstances. Periodic payment of rent is important but is not conclusive.

Where occupation follows ongoing negotiations for a lease, caution is required before implying a periodic tenancy. The result may differ where the occupier was already in possession, the proposed terms were agreed in principle, negotiations had effectively stopped, and the parties knowingly allowed occupation and accepted rent while leaving the legal nature of the occupation unresolved.

The claimants, who traded in partnership from shop premises, sought a declaration that they had a quarterly periodic tenancy protected by Part II of the Landlord and Tenant Act 1954. The premises had previously been underleased to a company which was later struck off the register.

After the company ceased to exist, the landlord agreed in principle to grant the claimants a seven-year underlease, subject to contract or lease. The claimants remained in occupation and paid rent, but the formal lease was not completed. The County Court found that a quarterly periodic tenancy arose. The landlord appealed, arguing that occupation and rent payments were referable to negotiations for the proposed lease and could not support that implication.

1. Appeal dismissed. The claimants had a quarterly periodic tenancy of the shop premises, and the order was upheld with costs.
2. The governing approach was that identified in Javad v Mohammed Aqil [1991] 1 WLR 1007. A tenancy may be implied where the parties have left a fundamental aspect of their consensual arrangement unresolved. The court must infer the intended legal relationship from what was agreed and all the surrounding circumstances. Periodic payment of rent is an important factor, but it is only one factor.
3. Caution is required where a person is put into possession, or permitted to remain in possession, while terms of a proposed lease are still being negotiated. In such circumstances, payment of rent does not necessarily imply a periodic tenancy. That caution did not determine this appeal because the claimants were already in occupation and were not put into possession in anticipation of terms being agreed.
4. The relevant circumstances supported the implication of a periodic tenancy. The parties had agreed the principal terms of a future underlease; the landlord knew that the named corporate tenant no longer existed; the claimants were known to be occupying and paying rent; negotiations did not continue; neither party pressed for completion of the lease; and the landlord was not shown to be concerned to prevent statutory protection. These circumstances filled the crucial gap concerning the legal nature of the claimants’ occupation.
5. The reasoning in JT Development v Quinn [1991] 2 EGLR 257 at 260M did not govern the issue. That case concerned whether the parties had made an immediately binding agreement for a lease and was distinguishable from the implication of a tenancy where the parties had left a gap in their agreement.
6. The alternative estoppel argument was not decided because the appeal failed on the primary tenancy issue.

• Court of Appeal (Civil Division) [2000] EWCA Civ 356: dismissed the landlord’s appeal and upheld the County Court’s conclusion that the claimants had a quarterly periodic tenancy.
• Central London County Court: HHJ Colin Smith QC determined the tenancy issue as a preliminary issue and held that the claimants had a quarterly periodic tenancy protected by Part II of the Landlord and Tenant Act 1954.