Erimus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd & Ors

The acceptance of rent from an occupier who holds over does not create a presumption of a periodic tenancy. The parties’ objectively determined intention depends on all the circumstances.

Where occupation continues as an interim measure while both parties intend to agree a formal lease, the usual and powerful inference is a tenancy at will. Slow or intermittent negotiations remain negotiations if they have not been abandoned. That inference is particularly strong where an interim periodic tenancy would obtain statutory protection despite the parties’ intended contracted-out lease. A periodic tenancy may instead be inferred where negotiations have ended and subsequent conduct shows that the parties have adopted a different arrangement.

EHL remained in occupation after its contracted-out lease of commercial premises expired. It continued to pay the former rent while it and the landlords negotiated a replacement lease, also intended to be contracted out of the Landlord and Tenant Act 1954.

After agreement was reached on proposed terms, EHL informed the landlords that it intended to vacate and proposed to continue holding over in the meantime. The landlords contended that the parties had created a protected yearly periodic tenancy. John Jarvis QC, sitting as a deputy judge of the Chancery Division, so declared. EHL appealed.

The central issue was whether the parties’ dealings objectively created a yearly periodic tenancy or only a tenancy at will, and consequently whether EHL’s notice validly ended its occupation.

1. Appeal allowed unanimously. Patten LJ, with whom Christopher Clarke and Longmore LJJ agreed, held that EHL occupied as a tenant at will. The court would make the declaration sought by EHL.

2. On expiry of a fixed term, an occupier initially holds as a tenant on sufferance. Once the landlord consents, the occupier is at least a tenant at will. Continued payment of rent, including rent reserved at an annual rate, does not presume a periodic tenancy. The question is the parties’ objectively ascertained contractual intention on all the circumstances.

3. The leading guidance in Javad v Aqil [1991] 1 WLR 1007 applied. Where parties are negotiating a new formal lease and possession is allowed in anticipation of agreement, the absence of agreed terms is a weighty factor. The usual, almost overwhelming, inference is that they did not intend an intermediate arrangement inconsistent with those negotiations. A tenancy at will will ordinarily result.

4. The phrase that parties are in the throes of negotiation does not require intense or continuous negotiations. It requires that both continue to intend a new lease on terms yet to be agreed. Here the negotiations had been slow but never abandoned, as their eventual agreement on terms confirmed. The intended lease was to be contracted out of the Landlord and Tenant Act 1954; the statutory protection which an interim periodic tenancy would attract made that inference stronger.

5. EHL’s later proposal to continue holding over until it vacated contemplated no alteration of its existing status. It could not support an implication of a protected yearly tenancy. Walji v Mount Cook Land Ltd [2002] 1 P&CR 13, where agreed lease terms were left unexecuted for years, was materially different.

• Court of Appeal (Civil Division) — allowed EHL’s appeal and declared that its holding-over occupation was a tenancy at will: [2014] EWCA Civ 303.
• High Court, Chancery Division — John Jarvis QC, sitting as a deputy judge, held that a yearly periodic tenancy had arisen. Citation not stated in the judgment.