A Tenant’s Guarantor recently unsuccessfully claimed that the Landlord’s actions meant the Lease it had guaranteed had been surrendered. If the Lease had been surrendered, the Guarantor would not have had to pay future arrears and take a new lease of the Property.
The Court reaffirmed some old decisions and clarified what would or would not constitute a surrender by operation of law (ending a lease early without a written document). Whilst the Judge emphasised that it is necessary to look at the Landlord’s conduct as a whole in deciding whether or not it had accepted a surrender by operation of law, the following specific actions were dealt with in the Judgment:-
1. At one stage the Tenant’s Administrators asserted that the Lease ended simply because the Tenant had vacated. The Court said absolutely not.
2. It is not uncommon for a tenant’s administrator to sell the tenant’s business and to grant a licence to the purchaser of that business allowing it to use the tenant’s property for a short while. This happened in this case. The purchaser of the business paid a licence fee (equivalent to the rent under the Lease) to the Administrators and the Administrators passed that sum on to the Landlord as rent. It seems the Landlord was fully aware of this arrangement and, although he did not object to the purchaser’s occupation (which was in breach of the alienation provision of the Lease), the Court was satisfied that the Landlord’s actions did not constitute an acceptance of a surrender of the Lease.
3. Once the purchaser had vacated, the Tenant’s Administrators returned the keys to the Landlord’s solicitors saying that if the keys were not accepted they would be thrown away. The Landlord’s solicitors accepted the keys but did so by expressly recording in writing that they were doing so for “security only and not as a surrender”. The Court said someone had to hold the keys and the Landlord’s solicitors’ actions were sensible and their statement as to the basis on which the keys were held was sufficient to defeat a claim that this constituted a surrender. If, however, the solicitors had counter-signed and returned a covering letter saying that receipt of the keys was an acceptance of a surrender the outcome would have been very different.
4. The Landlord became aware shortly after the purchaser had vacated that some of the doors to the Property had been left unlocked so the Landlord secured the Property. The Landlord’s Insurers initially required round-the-clock security for the Property which the Landlord had to arrange. Eventually, the Insurers agreed the Landlord could still maintain insurance if he boarded up the lower floor windows with steel screens and installed monitored intruder and smoke alarms. The Court said none of these actions amounted to an acceptance of a surrender, especially because the Tenant had said it was not going to take any steps to “protect” the Property. The Court confirmed that a landlord is entitled to take steps to protect and preserve its property. There was no evidence that the Property’s locks were changed to exclude the Tenant, nor to allow the Landlord to enter the Property for its own beneficial use. In such circumstances, the Court was satisfied that the Landlord had not gone beyond protecting its own interest in securing the Property.
5. The Landlord marketed the Property “with vacant possession” for a short while until its solicitors said such actions could prejudice its claim against the Guarantor. The Court confirmed that simply marketing did not amount to an acceptance of a surrender as the Landlord was only doing what, in the circumstances, was the best it could do.
6. During the time Property was vacant, the Police had asked if they could use the Property’s yard to kennel their dogs. At one level this must have appealed to the Landlord as the Property was being vandalised, but the Landlord declined on the basis that if he had authorised a third party to occupy this would have been seen as an acceptance of a surrender. Similarly, if the marketing exercise had found a new tenant, the Landlord would have had to have accepted/taken a surrender before it could grant the new tenancy.
Whilst every case will turn on its own particular facts, this case provides a number of useful lessons, most notably that the Landlord was absolutely right to constantly emphasise (in writing) that he had not accepted a surrender and that it is quite difficult for one party to successfully claim a lease has been surrendered by operation of law if the other maintains the lease is still in existence.
MH Real Estate
The New National Planning Policy Framework: What does it mean for Developers?
August 9th, 2018
MH Dispute Resolution
Buyer Beware – The Supreme Court enforces a “no oral variation” clause
August 7th, 2018
MH Life Sciences
Human Genome Editing
August 7th, 2018