Beware the accidental tenancy

Published bySteven Docherty

15th August 2016

Whether it's the Law of Unintended Consequences, or "the best laid plans of mice and men", sometimes things don't happen the way you expect.

In a recent Sheriff Court case, the local authority tried to recover possession of a flat which had been leased to a tenant.  There were arrears of rent, so they also sued for payment.  After the court action was raised, but before it was heard in court, the parties reached an informal settlement agreement, in terms of which the tenant was to be allowed to stay in the flat for a further period on payment of an agreed sum, which would be collected by way of an increased rent.  When the case then called in court, the local authority asked for it to be continued to a later date, essentially to see whether payment would be made.  All of this was unopposed by the tenant, who had not formally defended the action.

However, the fly duly landed in the ointment.  The Sheriff decided that, when the local authority reached agreement with the tenant to allow him to stay, they effectively allowed the creation of a new, informal, tenancy agreement which entitled the tenant to stay for a further year.  Accordingly, the Sheriff refused to let the action continue because the local authority had no basis for claiming a right to eject the tenant.

How did this come about? 

It relates to the fairly basic requirements in Scottish law for the creation of a tenancy - there are four such requirements:-

1. That the premises are identified.
2. That the parties are identified.
3. That the rent is agreed.
4. That the period of tenancy is agreed.

If all four of these are in place, then the law implies that a contractual tenancy agreement is in place.  Even if only the first three are agreed, the law fills in the fourth by implying a tenancy period of 1 year.

In this case, because the premises and parties were as they had always been, and that the parties had agreed the rent to be paid when they settled the court action, the court implied a tenancy period of 1 year, meaning that the new tenancy was now complete and therefore the local authority were prevented from continuing with their action.

This is not what the local authority intended - they wanted to collect their rent arrears but retain the right to eject the tenant if they didn't pay because the old tenancy had expired.  What they were left with was a tenant with security of tenure for another year.

What's the takeaway? 

If you want to eject your tenant, be careful that you don't accidentally create a new tenancy instead.  It was the pursuit of payment of the arrears which caused the problem here, because the local authority thought they could collect it by charging an increased rent in exchange for letting the tenant stay for a period. 

Perhaps they should have simply continued with their action, obtained a court order for ejection and payment of the arrears, ejected the tenant and then enforced their right to recover the payment.  They would then have been able to re-let the property to another tenant and collect rent from them too.

If in doubt, come and speak to us about any deal you are going to make with your tenant, so that we can make sure you don't find yourself on the wrong end of an unintended consequence.