In a recent Circuit Court case, Howard v Crown Paints Ireland Limited, the defendant leased factory premises from the plaintiff landlords for a ten-year period from August 2008, subject to an agreed rent.

The defendant remained in occupation following the expiry of the lease and served a Notice of Intention to Claim Relief, claiming the right to a new tenancy under Part II of the Landlord and Tenant (Amendment) Act 1980 (Act).

The arguments

Although there was no express agreement to this effect, the plaintiffs asked the Court to recognise that a lease between the parties came into existence following the expiry of the prior lease given that the defendant remained in occupation of the premises. Further, the plaintiffs claimed that this new lease was subject to a higher rent than that of the prior lease, given that higher prevailing market rates existed at the time of its alleged inception.

In a written judgment, Judge O’Connor determined that no provision in the Act obliges a tenant to take up a tenancy of less than five years where the tenant does not require such a tenancy. Rather, Part II of the Act merely confers qualifying tenants with a right to a new tenancy on the satisfaction of certain conditions.  Where the right to a new tenancy is invoked, a tenant has a choice regarding whether to take up a new tenancy but cannot have one automatically imposed on it.

Section 28 of the Act allows a qualifying tenant to continue in occupation pending resolution of an application for a new tenancy or to fix the terms of a new tenancy under Part II of the Act.  It provides that the tenant will continue to be subject to the pre-existing tenancy’s terms (including rent) pending resolution of the application.  The Court held that the fact a tenant remains in occupation during this period does not infer the creation of a new tenancy where that tenant does not require that tenancy. This is subject to the caveat that a tenant must not make an application in bad faith: where a tenant is deemed to have delayed the application to avail of a lower rent or to have abused the court process in some way, it may not get the benefit of avoiding the implication of the existence a new tenancy.

The plaintiffs also made estoppel arguments to the effect that the defendant’s conduct would give rise to an unconscionable situation, where it does not pay an additional rent after resiling from taking a new tenancy. The Court dismissed this on the basis that there was no promise or conduct which would give rise to an estoppel by imposing an obligation on a tenant where there was much uncertainty between the parties.

The Court, therefore, rejected the plaintiff’s application to find the defendants liable to pay market rent during the relevant period as being without any statutory foundation. However, the Court noted that where the tenant withdrew an application for a new tenancy, it is exposed to an adverse costs order, which the Court will consider later.

Summary

This judgment confirms that Part II of the Act gives tenants the right, and not the obligation, to a new tenancy.  The Court was not prepared to fix the terms of a new tenancy, including rent payable, which fell outside the provisions of the Act, as it is solely a matter for the Oireachtas to change the law to such an effect.

It should be noted that the judgment is currently being appealed to the High Court.  We will continue to keep you apprised of developments.

To discuss any of the matters raised in this article, please contact Gerard James or your usual William Fry LLP contact.

Contributed by Jack Stokes.