Your residential fixed-term lease expires but for whatever reason you don’t sign a new one. Nor does the lease say anything about what will happen on expiry. Is there still any form of valid lease in place and if so what terms and conditions apply? What rent is payable?
To avoid confusion over the answers to those questions, the Rental Housing Act (“the RHA” – which, as its name suggests, applies only to residential leases) says that you are deemed “to have entered into a periodic lease, on the same terms and conditions as the expired lease, except that at least one month’s written notice must be given of the intention by either party to terminate the lease.”
Your fixed-term lease is now a “month-to-month” lease. Nothing changes except that the lease is no longer for a specific period but rather continues indefinitely unless and until a month’s written notice is given by either party.
Critically, the rent remains unchanged, unless…
The case of the verbal rental increase
The bottom line, and what your lease should say about expiry
Of course your lease may have been a month-to-month lease from the start – we are talking in this article only about the concept of fixed-term leases expiring and automatically becoming month-to-month. It is in such a case that the upshot of this new High Court decision is that the answer to the question “What rental must the tenant pay under a month-to-month lease?” is that the rental remains unchanged unless – as in this case – the evidence shows clearly that a new rental was agreed upon.
That of course opens the door to uncertainty and dispute, and to avoid that make sure that your fixed-term lease provides clearly in writing exactly what will happen when it expires. Some leases for example provide that they will continue automatically on a month-to-month basis, but incorporating any changes to rental or other terms notified in writing by the landlord to the tenant. Without such a clause you could be in the same position as these parties, battling your way through the courts and hoping that a magistrate or judge (probably both in the end result) will uphold your interpretation of whatever you think was verbally agreed.
Avoid verbal leases!
As a final note, remember that verbal leases (in fact verbal contracts of any sort), and/or verbal amendments to them, are a recipe for misunderstanding, duplicity and dispute.
So although our law accepts the validity of verbal leases (written leases will be compulsory only when the latest amendments to the RHA finally come into force), in practice you should always insist on everything being in writing and signed by both parties, with a clause providing that no amendments will be valid and binding unless likewise reduced to writing and signed.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)