Skeletons in the (contracted out) closet: unexpected occupiers at lease expiry

Posted: 30/10/2018

It’s lease expiry day and your tenant has crept off into the twilight. You cheerfully stroll along to the premises to check all is in order, slightly troubled, however, by the menacing chill of the fresh autumnal air. You approach the building… but wait… there’s a light on and the shadow of a mysterious figure looms large behind the opaque blinds. This can’t be right…the tenant has gone, haven’t they? What skeletons have been left behind?!

Strangers (in a building) – unauthorised sub-tenants 

Unauthorised sub-tenants being left behind by a former tenant on lease expiry can be a real nightmare for landlords as, more often than not, there is no direct contract between the parties to govern this spooky relationship. Furthermore, depending on how long these occupiers have been haunting the premises, they may have unearthed rights to renew a tenancy of their own, under Part II of the Landlord and Tenant Act 1954. While it will be possible to bring a claim against a former tenant for breach of the coven[ant] to yield up with vacant possession, this will not resolve the main issue of exorcising any unwanted occupiers – responsibility for which will come down to the landlord.

Practical steps a landlord can take

• Prior to lease expiry, if there is some doubt as to who is in the premises, a statutory notice can be served on the tenant requiring them to provide information regarding any other occupiers in the premises (section 40 Landlord and Tenant Act 1954).
• A rent stop should be put in place on the immediate tenant’s lease to preserve the right to forfeit for breach of the alien[ation] covenant where any unauthorised sub-letting is found (eg a contracted out sub-lease for which licence was given, has now expired)).

A more familiar foe – the friendly ghost of tenant past

The position where a former tenant under a contracted out lease remains in occupation after lease expiry is another recurring nightmare for many landlords.

The former tenant’s status will, again, depend on a number of factors. As with unauthorised sub-tenants, there is a danger that such ghosts may become protected business tenants if the position is not regularised promptly. Furthermore, other issues may arise if the lease expiry date has been overlooked, such as the landlord’s claim for dilapidations being limited (for example, where tenant alterations are only required to be reinstated upon prior notice).

Where the landlord is prepared to grant a new lease but negotiations have failed to conclude by the lease expiry date, the position can be regularised fairly simply by putting in place a formal tenancy at will agreement. This should avoid a periodic tenancy arising (which has the danger of potentially generating business tenancy rights).

However, if the premises are required to be handed back spirit free, the landlord will normally need to start possession proceedings.

One treat from this scenario, however, is that a landlord will be able to claim mesne profits from the ghost of tenant past for use and occupation for the period during which it holds over. The rate of such sums is at double value – which is more generous to landlords and is not necessarily the same thing as double rent – no trick!

Practical steps a landlord can take

• Diarise lease expiry dates to ensure these are not missed/that rents are not inadvertently demanded for periods relating to the time after lease end. 

As above, a rent stop is usually a prudent step to take to avoid an implied periodic tenancy arising. 

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