There is a legal rule called ‘implied surrender’ or ‘surrender by operation of law’.
This says that if a party to a tenancy or lease acts in a way that is inconsistent with an intention to continue with the lease – that is deemed to be an ‘offer to surrender’ which the landlord can accept.
However – what is acceptance? I have recently come across a case which makes the point that the unequivocal conduct of BOTH parties is required.
Padwick Properties Ltd v. Punji Lloyds Ltd – 9 March 2016
The case was heard in the Chancery Division of the High Court earlier this year.
It involved a tenant of commercial premises – the story is a bit complex but the nub of the matter is that the tenant became insolvent and eventually the property was vacated.
The landlord was given the keys, made the property secure and put it back on the market briefly. However, it remained empty.
Some time later the guarantors were approached and asked to pay the outstanding rent. The guarantors argued that they were not liable as the lease had been ended by operation of law.
However the court disagreed.
- The receipt and acceptance of the keys was not sufficient to end the tenancy as the landlords only took them to maintain security of the property – a fact that they had made clear to the tenants, and
- The attempt to re-let the property did not give rise to a surrender by operation of law, although things would have been different if it had actually be re-let.
Advice for residential landlords, tenants and guarantors
Although this case is a commercial property one, the same rules will apply to residential lets. Points to take away are:
For landlords – when a tenant hands the keys back before moving out prior to the end of the fixed term – make it clear that you are not agreeing to end the tenancy (assuming you are not), but are just accepting the keys so you can keep the property secure
For tenants – don’t just move out. Try to find a replacement tenant and make sure that a new tenancy is actually given to them. You will have to pay for the landlord’s expenses but it will be cheaper than having to pay rent for the rest of the term.
For guarantors – keep tabs on people you guarantee. If you learn that they have moved out – check to see whether the tenancy has ended or not.
In actual fact, where tenants move out because they do not have the money to pay the rent, many landlords just accept the situation and treat the tenancy as being at an end. But they don’t have to.
There is no obligation on landlords to mitigate their losses if a tenant moves out mid-term – they are quite within their rights just to leave the property empty and bring a claim for unpaid rent against the tenants – and their guarantors – either after the fixed term has come to an end or after they have successfully re-let the property, or at any time before then.
And they can also bring this claim at any time during the next six years (after when the claim will become ‘statute barred’).
So, tenants – you need to be careful to protect your position. Just moving out is not enough to end your tenancy. It may be a lot more expensive than you think.
kenneth mayo says
April 19, 2016 at 4:29 PMThe big trouble is that the law is an ass!!! If a tenant leaves before the contract ends what is the purpose of chasing them for payment – lots of solicitors bills and the likelihood that they don’t have the money to pay anyway – plus if they are immigrants – try finding them – the whole system now is so weighted against the landlord that I wonder if its worth being a landlord anymore – if that is the case then this country will be in a sorry state. Something has to change to give the laws some actual teeth which they currently don’t have.
I wish governments would stop meddling in areas that they know nothing about and have no experience of being at the sharp end.
Somebody out there must see sense – the big question is who – we have a government embroiled in Europe and neglecting the requirements of home.
Industry Observer says
April 19, 2016 at 5:03 PM“There is no obligation on landlords to mitigate their losses if a tenant moves out mid-term – they are quite within their rights just to leave the property empty and bring a claim for unpaid rent against the tenants – and their guarantors – either after the fixed term has come to an end or after they have successfully re-let the property, or at any time before then.”
Agreed provided the Landlord has responded to the tenant’s offer of surrender by saying the surrender offered by the tenant is not accepted. Otherwise the Law takes silence as acceptance, in this case of surrender
Tessa Shepperson says
April 19, 2016 at 5:44 PMIf the tenant has signed a contract for a years tenancy he is bound by that. He cannot get out of it just because the landlord fails to respond to an offer to surrender.
You cannot be deemed to accept or agree to something by not responding to it – where did you get that from? What is your authority?
There are few exceptional circumstances for example if there is an estoppel situation or in the case of accepting keys the landlord should probably make it clear that the keys are not accepted as a surrender. But generally, you cannot be deemed to have agreed to something just by silence.
Otherwise I could send you an email offering to give you some quick advice for £1 million pounds and you would be bound by it by not responding to me!
Romain says
April 19, 2016 at 7:38 PMA surrender by operation of law occurs when the actions of both parties are incompatible with the continuing existence of the tenancy.
Unless estoppel or similar concept applies I am not sure that what the landlord says (or even writes in a letter or email) when a tenant offers to surrender makes much difference.