No-one has a crystal ball that can definitively tell them what the future holds. Every decision is a risk to a greater or lesser degree. When signing up to a lease, everyone is full of optimism. The landlord is anticipating receiving rent in full and on time and having his asset looked after. The tenant is anticipating operating a successful business and having profit to spare.
Life does not always work that way and sometimes a tenant will want to divest themselves of the liability of the lease. Their options are to: surrender; assign or sublet. With an assignment or sublease, the tenant retains at least some vestigial liability to the landlord. What we are considering here is surrender, where the tenant ceases to have any liability to the landlord.
There are two types of surrender – by deed and by operation of law. The first requires the surrender to be negotiated and agreed between the landlord and the tenant and for a deed to be entered into recording this. The tenant may make a payment to the landlord in consideration of the release of the covenants (including those to repair).
A surrender by operation of law is inferred from the conduct of the parties. It cannot be inferred from the action of only one party. The tenant simply handing back the keys would not be sufficient. The landlord must also accept these. Conduct of the landlord and tenant where a surrender has been inferred includes:
- The tenant vacating and the landlord going into beneficial occupation
- The landlord letting the property to a third party at the request of the tenant
- The landlord accepting rent from undertenants who have been directed by the tenant to pay the rent to the landlord
If the landlord can show that the keys were accepted by mistake or without prejudice then a surrender will not be inferred. Other circumstances where a surrender has not been inferred include:
- The landlord changing the locks at the property to secure it from intruders while maintaining a claim for rent against the tenant
- The landlord allowing a third party to occupy
- The landlord failing to demand rent and service charge, when it knew the tenant no longer wanted the lease.
Each case will turn on its own facts but tenants should be very wary of simply handing keys back and walking away. Too often they can find that the lease did not end as they anticipated and they face a huge bill – for rent arrears and service charges.
Where a tenant wants to end their involvement with a lease, they should speak to one of our specialists to establish the best way of doing this and to ensure that the lease does actually end as they expect.
This is not legal advice; it is intended to provide information of general interest about current legal issues.