Following an uncertain time in the country after recent political changes such as Brexit, the UK’s economy is facing a period of ambiguity. During these hazy times, it can leave commercial landlords vulnerable, especially in situations where a tenant is struggling and wants to get away from their lease obligations. In cases of formal insolvency, landlords do have the chance to come up with a solution; however, what happens if the tenant just vacates the property and hands back the keys?
If you’re currently facing a situation where your tenant wants to escape their lease obligations, they have the option to find a person to whom the lease can then be transferred over, or they can even look to negotiate a lease surrender with the landlord.
What Is a Surrender of Lease?
A lease is surrendered when the tenant’s interest is given back to the landlord and both parties accept that it will be terminated. A lease surrender can sometimes be carried out formally by deed, but this isn’t always needed. If both parties come to the agreement that the lease will be surrendered but their actions don’t meet the requirements of the continuing lease, the lease may then be surrendered by operation of law.
When you surrender a lease without a formal deed, the process is cheaper and faster, but it can spark uncertainty about the party’s intentions. The key component that needs to occur is that a party must demonstrate a distinctive action that proves both the landlord and tenant agree that the lease is over. This could be the tenant vacating the property as the landlord takes up the occupation instead, or if the landlord grants a new lease on the same property.
There can be cases of deliberate and accidental acceptance. If deliberate, the landlord will accept that the original lease is surrendered, and they will then grant a new lease to a new party. If accidental, they’ll both agree to vary the lease to extend the premises or the term. If this is the result, this will be treated as a surrender by operation of law whether the parties mean this or not.
The Tenant Leaves
So, can the tenant leave and hand back the keys? You’ll be pleased to read, no. It must be clear from the landlord’s conduct that the tenant’s act of giving up the property is accepted as a surrender.
If a struggling tenant gives back the keys, as a landlord, you should seek legal advice as soon as possible. The courts are known to be reluctant to decide that a landlord has accepted a surrender but problems can be avoided with the right legal lease advice. The landlord should make it clear instantly that the lease is not surrendered, even if they now have the keys. It’s crucial that you seek advice about rent demands and any offers by the tenant to make part-payment of arrears because this complex area can have far-reaching implications.
Acceptance of Surrender
If a landlord agrees to the surrender, the tenant will be released from liability from paying rent and carrying out any future lease covenants. As a landlord, you should know that the tenant will still be liable to pay any outstanding rent or breaches of contract. You can also look to recoup losses through the tenant’s guarantor for unpaid rent, but this is again a complicated task that is better pursued with expert assistance. Landlords should also be cautious that everything is in place and checked before taking a surrender to avoid unexpected liabilities.
Any commercial landlord will not want to be faced with an empty property or a failed tenant that they are chasing for money, swaying their attention and time. At all times, it is best to seek help from lease advisory specialists who will assist you in taking back control of the property in the right way.