The act of surrendering a commercial lease occurs when the landlord consents to the transfer of the tenant’s interest and both parties mutually agree to terminate the lease agreement. Formal implementation through legal documentation is one approach that can be employed, while not always required.
In the event that both the landlord and tenant reach a mutual agreement to surrender the lease and thereafter engage in actions that are incongruous with the lease’s continuation, the surrender will come into place automatically through the legal principle of ‘operation of law’.
The most commonly employed approach for terminating a lease is through the execution of a formal statement by both parties involved. In instances where the initial lease agreement was established via a deed, namely for lease terms lasting three years or more, it is necessary for the surrender paperwork to likewise be executed in the form of a deed. In this article, What Is A Surrender Of Lease, we take a look at the process and mechanism involved.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of surrendering a commercial lease, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Can the tenants just hand back the keys?
The simple answer is no. The acceptance of a tenant’s surrender of the property must be evident through the landlord’s conduct.
In the event that a tenant facing financial difficulties surrenders the keys to the landlord, it is advisable for the landlord to promptly seek legal advice. Courts have exhibited a certain degree of hesitancy in recognising inadvertent acceptance of surrender by landlords. However, by seeking appropriate advice, these issues can be mitigated. It is imperative for the landlord to promptly communicate that the lease has not been surrendered, despite the fact that the landlord now possesses the keys. It is very important to get guidance about rent demands and any offers made by the tenant to partially settle outstanding debts, since this complex area might have profound consequences.
How can the landlord protect the property?
In the case of Padwick Properties Ltd v Punj Lloyds Ltd [2016], the court rendered a verdict regarding a contentious matter pertaining to the potential surrender of a lease through the legal principle of operation of law. The dispute arose when the tenant vacated the premises and subsequently returned the keys.
The landlord implemented lock replacements, enhanced security measures to deter unauthorised individuals, and initiated marketing campaigns for the property. The guarantor of the tenant, in an attempt to evade responsibility for the outstanding rent payments, asserted that the steps taken by the landlord indicated a definitive acknowledgement that the lease had been voluntarily terminated. The court held a contrary opinion. The landlord’s decision to engage in marketing efforts and ensure the security of the premises can be considered justifiable, without implying any acceptance of surrender on the part of the landlord.
What happens if the landlord accepts the surrender?
In the event that the landlord agrees to a surrender, the tenant will be relieved of their need to make rental payments or follow the terms of the lease going forward. Nevertheless, the tenant remains responsible for any outstanding rent payments and any previous breaches of the lease agreement.
The landlord has the potential to pursue outstanding rent payments and other breaches from the tenant’s guarantor. Nevertheless, this issue is multifaceted and it is advisable for the landlord to seek expert legal advice.
It is also a good idea for landlords to exhibit prudence and engage in thorough investigations before accepting a surrender in order to mitigate potential unforeseen liabilities. For instance, in the event that the tenant establishes an underlease, it will continue to be effective, so preventing the landlord from obtaining vacant possession. Consequently, the landlord will be responsible for fulfilling their duties as outlined in the underlease.
How we can help
We have a proven track record of helping clients with commercial lease surrender. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of surrendering a commercial lease. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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