In a residential context, tenants and landlords usually consider fixed term tenancies as straightforward. The tenancy starts on a certain date and ends on a certain date. Easy.
In a commercial context, however, it can be different. In a recent decision the English High Court held that the company tenant was liable for another 13 months rent after the fixed term tenancy had ended and it had remained in occupation. Key to this decision is the distinction between a tenancy at will and a periodic tenancy.
A tenancy at will can be terminated immediately by either party. It can occur at the end of a fixed term tenancy, for instance by the parties agreeing that the tenancy continues till the tenant finds a new place. A periodic tenancy can only be brought to an end by service of the required notice by either party. Again, such periodic tenancy can occur at the end of a fixed term tenancy when the parties negotiate new terms and the tenants remains in possession. But when those negotiations fail or simply don’t continue, a periodic tenancy is established. The problem then becomes what notice period applies.
As a general rule, the length of notice is, at the minimum, the frequency of rent payments, i.e. weekly, fortnightly, monthly, maybe even yearly. In the case, the Court held that the parties’ conduct had been inconsistent with a tenancy at will. It was also unclear how long the tenant wanted to stay in possession and hence a periodic tenacy was created. The tenant had also begun paying a yearly rent and on that basis the Court concluded that one year’s notice had to be given.
An expensive way to end a tenancy, and which could have easily been avoided.