Beware! You may be a trespasser in your property (2)

What happens when the term of your lease agreement expires and you stay on? In the eyes of the law, have you migrated to becoming a statutory tenant or a trespasser? The case of Oteri Holdings Ltd. v Heritage Banking Co Ltd. (2020) LPELR 50802 (CA) highlights the legal differences and explains the options one has under either

We began the tale by introducing two companies: Company A and Company B. Both companies entered into a lease agreement where Company A (Landlord) leased to Company B (Tenant) the left wing of a four-floor office building located in Apapa, Lagos for a term of 20 years with an option to renew. The term granted under this lease agreement would normally have expired 28 February, 2005, but Company B remained in possession and did not vacate the premises until 2012, where Company A got a court order from the Magistrate court and only then did Company B yield possession.

As you recall, the Landlord in 2010 brought this matter to the High Court for a claim for mesne profits, which did not succeed and the High Court found for the Tenant, which resulted in the Landlord appealing to the Court of Appeal. The High Court found against the Landlord because it was of the belief that there still existed a landlord-tenant relationship between the companies, due to the automatic renewal of the lease, and though Company B did not pay rent during the period of the automatic rent renewal, what is due to the Landlord is payment for arrears of rent and not mesne profits.

At this point, we must briefly understand what mesne profits are and the circumstance by which they arise. Mesne profits are essentially damages for trespassing and can be claimed from the date when a person ceases to hold a property in some form of legal possession and then become a trespasser. So, essentially, if the High Court believes that the tenancy did not end in 2005 and then the relationship between the companies was akin to a landlord-tenant relationship, then Company B remained a tenant and during the auto renewal period where rent was not paid, it cannot be mesne profits because Company B was not a trespasser. What makes this interesting is that, at the Court of Appeal, the justices found for the Landlord on grounds that we can all relate to and learn from. It is easy to find yourself in a situation where your tenancy for four years has ended but you remain in full occupation of the property, and because your landlord has not asked you to move out and is, for whatever reason, silent, the law says you have become a trespasser in your own home.

“When a landlord is not forceful about evicting a tenant from its premises, one must be wary as such generosity comes at a price in the end”

The Tenant’s lawyers, in their appeal, claimed that, given the various discussions on the renewal of the lease and the Landlord’s demand for rent that was never paid! Company B became a statutory tenant not a trespasser. Whereas, in the Court of Appeal’s judgement, it was found that the tenancy ended in 2005 and there cannot have been an automatic rent renewal because the law says where a tenant is desirous of exercising an option to renew, he must exercise this option exactly as it is asked of it in the lease agreement. In this case, parties had to agree and a culmination of all letters to the Landlord of the Tenant’s intention to renew the lease cannot bring forth an agreement between the parties, therefore, it is concluded that Company B became a trespasser from 2005 and is liable to pay mesne profits.

When a landlord is not forceful about evicting a tenant from its premises, one must be wary as such generosity comes at a price in the end because the twist in this story is that the Tenant was not paying rent during the extra five years. If the Landlord was paid rent by the Tenant during this period, the law would be on the side of the Tenant. He may then become a statutory tenant, for which the Landlord would have to serve a Seven Days’ Notice of Owner’s Intention to Recover Possession. Maybe we’ll delve more into this next week.

In summary, if you are in this situation, get your landlord to agree and accept the terms, if you wish to renew. And if not, vacate the premises immediately, otherwise, you are a TRESPASSER.