Tenancy negotiations did not lead to a binding agreement
Author: Michael Callaghan
Applies to: England and Wales
The court has held that two parties had not entered into a tenancy agreement because the start date had never been agreed between them.
To create a contract, one person (whom we will call A) has to make an offer and the other person (whom we will call B) has to accept it. B has to accept what A has offered. If B makes changes to the terms when accepting the offer, this does not result in a contract but a counter-offer from B. This counter-offer supersedes A's original offer, and needs to be accepted by A. If A does not accept the counter-offer, then there is no contract. Failure to appreciate this basic rule of contract law led to the dispute in Publity AG v Chesterhill Properties Ltd  EWHC 1994.
Terms were being agreed for the letting of a residential property in Mayfair. The landlord signed a copy of the tenancy agreement with a term commencement date of 14 January 2015. Because the tenant was not given access to the property, at a later meeting it changed the term commencement date on the tenancy agreement to 1 February 2015. The change was initialled by the landlord's agent but the tenancy agreement was not completed. At a later date, the tenant printed off a further copy of the tenancy agreement signed by the landlord with the original term commencement date and signed and dated this. The landlord then claimed that there was no agreement. The court had to decide whether the parties' actions had led to a concluded contract.
The judge held that there was no tenancy agreement. The original offer by the landlord was to let the property from 14 January 2015. The action of the tenant in changing the term commencement date to 1 February 2015 created a counter-offer. Crucially, this meant that the landlord's original offer to let the property from 14 January 2015 lapsed. The original offer could not be revived by the tenant signing the original tenancy agreement. The parties were not of one mind as to when the tenancy should begin.
For good measure the judge also held that, although the tenant's signatory had added the date after his signature, this did not amount to dating the tenancy agreement. The document itself (perhaps unusually) stipulated a particular way in which the document had to be dated, and this had not been done.
The only comfort for the tenant was that the judge ordered the landlord to return a deposit of £52,000 paid by the tenant, ruling that the terms upon which it had been paid were as a deposit and not, as the landlord had claimed, a payment for works to the property that the landlord had agreed to carry out. As the tenancy agreement had never been concluded, the purpose of the deposit had failed and the tenant was entitled to its return.
The lesson to be drawn from this unfortunate episode is that - in normal circumstances, at least - if two parties are not in agreement as to the proposed terms, there will be no contract between them.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.