Property litigation column: what is a tenancy at will?

John de Waal KC considers the recent case of Valley View Health Centre and others v NHS Property Services Ltd [2022] EWHC 1393 (Ch) and whether the occupation was under the terms of a tenancy at will or a tenancy implied from conduct.

In Valley View Health Centre and others v NHS Property Services Ltd [2022] EWHC 1393 (Ch) the Court (Edwin Johnson J) had to determine a number of issues between five GP practices and their landlord, NHS Property Services Ltd.

In two of the cases (Valley View and St Andrews) the Court was required to decide whether the claimant practices occupied under the terms of a tenancy at will or a tenancy implied from conduct. The significance of the point is that in the latter case the tenancy would be protected under the Landlord and Tenant Act 1954 (LTA 1954).

As the Court explained at paragraph 169 of the judgment:

“Where a party is allowed into occupation of the land of another, without the parties having agreed terms for the relevant occupation, the law is left to imply, from anything which was agreed and from all the surrounding circumstances, those terms which the parties are to be taken to have intended to apply. In terms of the nature of the right of occupation, there are a number of possibilities. The arrangement may only amount to a licence. Where however a party is allowed into possession of land and pays rent on a regular basis, it may be appropriate to imply a periodic tenancy. In a commercial case this can be significant because the periodic tenancy, assuming business occupation by the tenant, may well qualify for the protection of the 1954 Act. Another possibility is that the law will imply a tenancy at will. The essence of a tenancy at will is that the tenancy is on terms that either party may determine the tenancy at will at any time; see Woodfall’s Landlord and Tenant, Volume 1, at 6.062. For as long as the tenancy at will subsists the tenant is entitled to exclusive possession of the relevant land, but the tenancy is precarious because it subsists at the will of the parties. Either party may determine the tenancy at will at any time. In a commercial case the particular significance of a tenancy at will is that it is not capable of enjoying the protection of the 1954 Act, in marked contrast to a periodic tenancy.”

The GPs in the Valley View practice took up occupation of the premises as long ago as 2007. At that point, it was intended that there be a formal lease. However, matters went quiet for a few years until discussions were resurrected in 2011. At that point, the proposal was that Valley View take an assignment of the underlease of the premises held by the landlord. Negotiations then
continued sporadically until the dispute arose in 2019.

Valley View submitted that it occupied under a tenancy implied by conduct in the payment and acceptance of rent and had done
so since 2007; it argued that the gap in negotiations between 2007 and 2011 meant that it was too long for there to be a tenancy at will. Valley View submitted for a tenancy to be a tenancy at will it was necessary for the evidence to suggest that the parties were in the “throes of negotiation” as explained by Nicholls LJ in the leading case Javad v Aqil [1991] 1 WLR 1007, CA.

However, the Court referred to the more recent case of Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Ltd [2014] 2 P&CR 4, CA in which the parties were engaged in prolonged negotiations for a new lease. At paragraph 24, Patten LJ considered what was required, in terms of negotiations. As he explained, the concept is a flexible one:

“The judge interpreted the reference by Nicholls LJ to the throes of negotiation as importing some requirement for a particular intensity of negotiations. But, in my view, it means no more than that the negotiations should be continuing in the sense that both parties remain of the intention that there should be a new lease on terms to be agreed. Mr Rosenthal for EHL accepted that one could have a case in which the negotiations either broke down or came to an end but the tenant was allowed to remain in occupation paying the rent and other outgoings. In time the correct inference in such a case might be that the parties had chosen to regulate their legal relationship by something other than the grant of a new long lease and a periodic tenancy might then be implied.”

In the instance case, the Court concluded that negotiations had continued over the period 2007 to 2011 and the tenancy was therefore a tenancy at will.

What the decision in Valley View demonstrates is that there is theoretically no time limit for a tenancy at will – parties can be held to have continued to negotiate for a period of over 15 years without reaching an agreement.

I think that the decisions in Erimus and Valley View both show that the courts are reluctant to find that landlords and tenants have entered into LTA 1954 tenancy by accident, as it were. So long as there are some kind of negotiations between the parties, the courts will imply that the proper understanding of the tenancy is that it is a tenancy at will.

Article by John de Waal KC. First published by Practical Law’s Property Litigation Column.