The danger of holding over on tenancies
… contracted out of the Landlord & Tenant Act 1954
It is important to remember that having entered into a lease which is contracted out of the Landlord & Tenant Act 1954 (“the Act”), it is very easy to mistakenly provide the tenant with protection under the Act at the end of the tenancy period. As the landlord you need to be very careful in respect of how you act.
As is so often the case, prevention is far better than cure. The best course of action is to be well aware of when the rental period is going to come to an end, clarify if both parties want a new lease and make sure that negotiations are opened with the tenant and/or their representatives at the earliest opportunity.
If an agreement is not in place and the tenancy is coming up to expiry, then as the landlord you need to be very careful as to what you do after the expiry date has passed.
The position is that if you act without thinking it is quite possible you will create a periodic tenancy which has full protection under the Act. Protection for the tenant is probably the very thing you were seeking to avoid when excluding the original tenancy from the Act in the original lease.
The action which is most likely to be used as evidence of creating a tenancy and therefore providing the tenant with protection under the Act, is the continuing acceptance of rent. Although accepting rent has not been held by the Court as absolutely raising the presumption of a periodic tenancy, it nevertheless is going to provide the tenant with good evidence to argue that a periodic tenancy has been created. It unnecessarily creates difficulty for the landlord.
Therefore serious consideration must be given to putting a rent stop in place. This means that no demand for rent is made and nothing is accepted until or unless an agreement has been reached and a new lease is in place.
Whilst there should be no claim at the time of the rent stop for mesne profits, (mesne profit means, money that a landlord can claim from a tenant who continues to occupy property after his tenancy ends) as landlord you are entitled to make a claim on the basis the tenant is trespassing by staying on your land.
If ultimately a new lease is not entered into, you will still have the option of seeking payment for mesne profit. The amount is equivalent to the current market rent of the property. This may be more than the rent that the tenant was paying before the tenancy ended.
The most important thing to bear in mind is that as the landlord, your actions at the time of the expiry of a lease can have a dramatic effect on your rights and entitlements and those of your tenant. As such it is sensible to think about exactly what you want to achieve at least a few months before the end of the tenancy so that everything can be set up with plenty of time to spare. That in turn will minimize the chance of taking actions which generates protection for the tenant under the Act.