Surrendering your Lease? It takes two

Leases can be terminated in a number of ways.  One way is where both Landlord and Tenant decide to bring the lease to an end early – a surrender.

Surrenders can occur in two ways:-

1. expressly (by the parties entering into a Deed of Surrender); or
2. impliedly through the conduct of the parties – a surrender by operation of law.

A surrender by operation at law can be useful but it is important to remember that the conduct of both parties must be consistent with the lease having been surrendered.  A tenant cannot rely solely upon its own conduct for a surrender to arise.A recent case in the High Court has highlighted the dangers of trying to rely upon a surrender by operation at law where the Landlord does not want one to arise:-

Padwick Properties Limited v Punj Lloyd Limited [2016]

Facts

The occupiers of a property returned the keys and offered a surrender to the Landlord; the Landlord received and accepted the keys to the property and made it expressly clear that they only did so to maintain security to the property. The Landlord then engaged extra security, changed the locks and then even marketed the property.

Decision

The court examined the behaviour of the occupiers and the Landlord and decided that the lease was not surrendered; the Landlord’s actions (the changing of the locks, the acceptance of the keys and marketing the property) did not amount to an acceptance that the lease was at an end and was simply protecting its interests in the property. It was held that the conduct of the parties must unequivocally amount to an acceptance that the tenancy has ended.

Comment

The case highlights the need for unambiguous conduct on the part of both parties for a surrender to occur, highlighting also the importance of an accurate paper trail and formal documentation. A tenant cannot simply divest itself of a lease by walking away from the premises.

Equally, Landlords should also exercise caution when dealing with returned keys and note that the action they take after a set of keys is returned will have consequences. If it is made clear how and on what terms keys are being accepted, this will stop any arguments to the contrary. In this case the Landlord was live to the risk of a surrender by operation of law and was therefore careful to expressly state that the return of keys was only accepted to protect their interest.

Napthens’ dedicated Commercial Property team advises both Landlord and Tenant clients on the termination and surrender of leases, their correct procedures and formal documentation.