Commercial Lease - peppercorn rent - notice after Term
Discussion
A small charity I'm involved with has a lease on a commercial space. It was 9-month fixed Term tenancy, outside of the act, at a rent of 1 peppercorn (if demanded) for the whole term (i.e. free space provided by the landlord). It was not a "rates mitigation scam" - the charity was actually using the space.
The Term ended a year ago. During the Term, the notice period stated was 48 hours (it is a variation on the "meanwhile" type of leases). So there was a Term Certain (maximum duration) of 9 months, with a rolling Landlord-only break clause of allegedly 48 hours from day 1.
The Term ended 13 months ago. Then landlord has been happy for the charity to remain, but that may of course not be the case forever. But the charity has now grown "roots" and would prefer not to be bound by the ardous nature of a rolling 48 hour break clause any longer - this is no longer a "very short term" arrangement.
I understand enough to know that this area can get quite complex quite quickly.
This is what I think may have happened in law:
- the Term ended in April 2016
- the parties did not enter into negotiations for a new lease; L merely allowed T to hold over
- a periodic tenancy has arisen, with a period of 9 months
- the periodic tenancy will be protected by the Landlord and Tenant Act 1954
The negotiation part of the above seems important in light of Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Limited (the Court of Appeal decision), in which great importance was given to the distinction between a period of ongoing negotiation for a new lease (leading to a tenancy at will) and a simple allowing of T to continue to operate (leading to a periodic tenancy).
If that is the case, the T will be entitled to (at least) a notice period of 1 period, servable up to and including the last day of the preceding period.
That would mean that, with a 9 month period starting on (in this case) 15th April 2016, the period end dates would be 14th January 2017, 14th October 2017, 14th July 2018. If the landlord wanted now to give notice, that would require notice to be given no later than 14th October 2017 with an earliest termination date of 14th July 2018.
In addition, because the tenacny was a "term of years" and is now a periodic tenancy protected by the act, the tenant could if they wished serve a Section 26 notice requesting a new lease.
So, would anyone like to offer any thoughts on this line of thought?
The aim is not to piss of the landlord, who has generously provided free space; it is to provide some context to any negotiations over a sligthly less gun-to-the-head existence than a rolling 48 hour break clause!
The Term ended a year ago. During the Term, the notice period stated was 48 hours (it is a variation on the "meanwhile" type of leases). So there was a Term Certain (maximum duration) of 9 months, with a rolling Landlord-only break clause of allegedly 48 hours from day 1.
The Term ended 13 months ago. Then landlord has been happy for the charity to remain, but that may of course not be the case forever. But the charity has now grown "roots" and would prefer not to be bound by the ardous nature of a rolling 48 hour break clause any longer - this is no longer a "very short term" arrangement.
I understand enough to know that this area can get quite complex quite quickly.
This is what I think may have happened in law:
- the Term ended in April 2016
- the parties did not enter into negotiations for a new lease; L merely allowed T to hold over
- a periodic tenancy has arisen, with a period of 9 months
- the periodic tenancy will be protected by the Landlord and Tenant Act 1954
The negotiation part of the above seems important in light of Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Limited (the Court of Appeal decision), in which great importance was given to the distinction between a period of ongoing negotiation for a new lease (leading to a tenancy at will) and a simple allowing of T to continue to operate (leading to a periodic tenancy).
If that is the case, the T will be entitled to (at least) a notice period of 1 period, servable up to and including the last day of the preceding period.
That would mean that, with a 9 month period starting on (in this case) 15th April 2016, the period end dates would be 14th January 2017, 14th October 2017, 14th July 2018. If the landlord wanted now to give notice, that would require notice to be given no later than 14th October 2017 with an earliest termination date of 14th July 2018.
In addition, because the tenacny was a "term of years" and is now a periodic tenancy protected by the act, the tenant could if they wished serve a Section 26 notice requesting a new lease.
So, would anyone like to offer any thoughts on this line of thought?
The aim is not to piss of the landlord, who has generously provided free space; it is to provide some context to any negotiations over a sligthly less gun-to-the-head existence than a rolling 48 hour break clause!
You would probably be right about the notice period, but the court might set the interim rent at open market rental value, given the lack of goodwill shown by the tenant in comparison to the landlord.
From a non-legal perspective I think your post shows a pretty shoddy attitude to a generous landlord.
Thank you. Nobody is wanting to be shoddy towards the landlord (and I'm a landlord myself). And I said that in the original post.
The landlord is waiting on planning to demolish the (multi-unit) building. He paid the last paying tenant to move out. Nobody is trying to exploit a situation of generosity. Equally this arrangement is ensuring the landlord pays no empty rates.
The only question was about what the legal position was, so that if there is a negotiation and the landlord says "you have no rights" then the trustees can (acting in the best interests of the charity, as they must) say "yes we do, but we don't want to enforce them, just negotiate for say 1 month's notice and not 48 hours."
The landlord is waiting on planning to demolish the (multi-unit) building. He paid the last paying tenant to move out. Nobody is trying to exploit a situation of generosity. Equally this arrangement is ensuring the landlord pays no empty rates.
The only question was about what the legal position was, so that if there is a negotiation and the landlord says "you have no rights" then the trustees can (acting in the best interests of the charity, as they must) say "yes we do, but we don't want to enforce them, just negotiate for say 1 month's notice and not 48 hours."
Edited by skwdenyer on Sunday 14th May 00:00
Edited by skwdenyer on Sunday 14th May 00:00
Mattt said:
If the charity needs long term space with the legal rights that would provide, should it not move there instead?
Your post sounds very mean spirited as has already been highlighted.
I'm sorry if it sounded like that. It is not meant to be.Your post sounds very mean spirited as has already been highlighted.
I'm neither a trustee nor manager or employee of the charity concerned. I thought the legal question was interesting. And the trustees wondered (for a variety of reasons relating to the overall relationship that cannot be spoken of here but are way more complex) what the actual legal position might be.
As I said, I'm a commercial landlord myself. This question has direct bearing on me from the other side (as I do grant low / no cost fixed term leases sometimes for charities, and had not thought in terms of what might happen on the back end of such a deal).
So I'll repeat again: the bad faith some seem to attribute here is entirely absent. I can't evidence it. And there's no self-interest angle here for me or anyone else.
I'm sorry to have ruffled feathers. I've never before been accused of bad faith simply for asking what the law provides for, in order to inform! Knowledge does not create poor outcomes; actions do!
Your argument for a periodical tenancy appears to be based on no discussion regarding a new lease while holding over, however you also state that the landlord is happy for the tenant to stay for the time being.
The latter suggests there has been some discussion. If so, then the judgement would suggest that a tenancy at will exists.
The latter suggests there has been some discussion. If so, then the judgement would suggest that a tenancy at will exists.
PurpleMoonlight said:
Your argument for a periodical tenancy appears to be based on no discussion regarding a new lease while holding over, however you also state that the landlord is happy for the tenant to stay for the time being.
The latter suggests there has been some discussion. If so, then the judgement would suggest that a tenancy at will exists.
No discussion about remaining. L happy for T to stay evidenced by T still being in occupation and no communication by L to contrary! Thank you.The latter suggests there has been some discussion. If so, then the judgement would suggest that a tenancy at will exists.
It's fairly obvious what the true position was from the outset. The landlord is awaiting planning permission and then will either sell, or develop. In both those scenarios there will be a period of much greater than 48 hours for the tenant to pack up their stuff and leave.
If the charity attempted to go legal on this it would needlessly waste the charity's money on solicitors and surveyors and probably end up paying a significant amount of rent.
In light of the magnanimity already shown by the landlord I would let it lie, but I would also be keeping an eye out for a more permanent home.
If the charity attempted to go legal on this it would needlessly waste the charity's money on solicitors and surveyors and probably end up paying a significant amount of rent.
In light of the magnanimity already shown by the landlord I would let it lie, but I would also be keeping an eye out for a more permanent home.
I don't agree with your analysis of what the period of the tenancy is. A 9-month periodic tenancy simply never exists in reality, and I don't think the entire original lease term could be construed as the period; since there's no rent paid (has there been anything else, e.g. service charge, insurance etc) then it's very hard to ascertain the period if it had become a periodic tenancy which leads me to think it's a tenancy at will.
The lack of rent paid also makes it much less likely that any form of secure tenancy will have be implied from the occupation beyond the term.
Any statutory renewal, if it were possible, would be at open market rent not a peppercorn.
The lack of rent paid also makes it much less likely that any form of secure tenancy will have be implied from the occupation beyond the term.
Any statutory renewal, if it were possible, would be at open market rent not a peppercorn.
Thank you. I tend to think that a judge would adopt the "walks like a duck" approach here. But I also don't think it would ever get there - the trustees are not so daft (or ungrateful as discussed) as to go legal on this.
There is a lot more to this. If I'm able I will add colour to this thread (in case anyone is interested). What I will say is that one would hope a charity's trustees would understand that things said or promised but not written in a lease are, err, not written in a lease...
There is a lot more to this. If I'm able I will add colour to this thread (in case anyone is interested). What I will say is that one would hope a charity's trustees would understand that things said or promised but not written in a lease are, err, not written in a lease...
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