Content area
Full Text
In this month's potted guide, Jonathan Seitler QC guides practitioners through the basics of the law relating to surrender of leases
What is a surrender?
A lease is surrendered when the landlord and the tenant agree that it will come to an end. If the surrender is effective, that is what happens. In theoretical terms, the tenant's interest is acquired by the landlord: the tenant is transferor and the landlord is transferee.
The landlord becomes re-entitled to possession and the tenant is released from its obligation to pay rent. Both landlord and tenant are released from liability for the performance of all obligations under the lease, though they will remain liable for crystallised losses in relation to existing breaches (such as terminal dilapidations liability) unless such sums are settled expressly. The same goes for the tenant's guarantor (Torminster Properties Ltd v Green [1983] 1 WLR 676; [1983] 2 EGLR 30).
Where the reversion on the lease or term of the tenancy vests in more than one landlord or tenant jointly, a surrender is only effective if made and accepted by all of them. This contrasts with the rules concerning giving a notice to quit a periodic tenancy vested in joint tenants, when the notice can be valid and effective if given by only one of the joint tenants.
How does a surrender occur?
There are only two ways: (i) expressly, by deed; or (ii) impliedly, by operation of law. The latter arises when the parties behave in a way which is inconsistent with the continuation of the tenancy and it can happen irrespective of the parties' actual intentions, ie by accident. This makes surrender by operation of law a dangerous thing.
When does an express surrender need to be preceded by agreement to surrender?
An agreement to surrender is not always required; it is only necessary where an immediate surrender is not appropriate, but the parties need to be committed to it without delay.
An agreement to surrender would normally cover such matters as: (i) the date, price and manner of the surrender; (ii) whether the surrender will occur with vacant possession; (iii) each party's responsibilities in relation to the property pending completion of the surrender; (iv) the mechanics for handover of the...