The case of Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Limited provides a useful reminder of the potential risks of a tenant remaining in occupation after the expiry of their lease if that lease has been contracted out of the provisions of Part II of the Landlord and Tenant Act 1954.  In this case, it was to the detriment of the tenant that their occupation was not formally documented as a tenancy at will. However, landlords should also be wary of allowing tenants to stay in occupation after a contracted out lease has expired, as this can give rise to a periodic tenancy with 1954 Act protection.

The facts
The tenant was in occupation of the unit under a contracted out lease. The lease expired but the tenant remained in occupation. There is an implied assumption that when a contracted out lease expires and the landlord and tenant remain in negotiations for a new lease, the continued occupation will be under a tenancy at will. However, this can change if the conduct of the parties is inconsistent with how parties would act under a tenancy at will. A tenancy at will is a tenancy that can be terminated by either party at any time immediately on notice.

In this case, the tenant continued to pay rent but negotiations for a new lease stalled, and then stopped altogether. In the interim period the tenant decided that it no longer wanted to stay in the unit and built new premises elsewhere.