Monday, 10 February 2014

The Dangers of Letting on a Handshake - 10th February 2014

My last blog, on tenancies at will and on the Landlord and Tenant Act 1954 (the “Act”), is relevant to the following two tips – one for landlords and one for tenants:

(1) Landlords of commercial premises are unwise to let tenants in on a handshake.

To do so will often result in the tenant acquiring unintended security of tenure rights under the  Act.
In outline, these  mean that a minimum 6 months notice to quit is required and that there are only limited grounds, involving payment of compensation, on which the landlord may refuse the grant thereafter of a new, written lease for a period of up to 15 years.   It is possible, therefore, for a landlord to let a tenant in just for a few months and then find he is stuck with him for much longer.

(2)  Conversely, tenants of commercial premises are taking a risk if they continue in occupation beyond the end of a lease but don’t get the landlord to grant a new one.

If the lease is protected by the Act, then there isn’t a problem for the tenant (other than an obligation to give a minimum of three months’ notice to stop rent continuing) but if the lease excluded the Act, the position is different.  To keep costs down, it is tempting for a tenant to rely on the landlord’s acquiescence or verbal agreement to him carrying on in occupation.   However,  the cases show that this is likely, in the absence of the Act applying, to be under an implied tenancy at will.   Even if the tenant is intending to stay on for a few weeks only,  he will be at the mercy of the landlord’s discretion on whether to allow the arrangement to continue longer than on a day to day basis.  He risks being given immediate notice to quit and becoming a trespasser at any time.

Paul Dixon

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