Surrender is the consensual termination of a lease by agreement between the landlord and the tenant.  Surrender can be expressly set out in documentation or it can be implied. An implied surrender is referred to as surrender by operation of law. Where the tenant is doggedly attempting to end the lease against the landlord’s wishes the landlord needs to ensure that its actions do not amount to acceptance of a surrender.  

A recent case served as a reminder that the conduct of both the landlord and tenant are relevant to effect surrender by operation of law and that the return of keys and vacating the premises alone are not sufficient to bring about a surrender by operation of law.  

 The Facts  

Administrators of a tenant company granted a successor company a licence to occupy business premises for a handover period. At the end of that period they declined all further responsibility under the lease of the premises. In due course the tenant company went into liquidation and the lease was disclaimed. The landlords sought to require the tenant company’s guarantor to take a new lease under the terms of the guarantee, but they refused, on the grounds that the lease had been surrendered by operation of law prior to the date of the disclaimer, and that they were therefore discharged from the guarantee. 

The successor company had vacated the premises on 29 September 2011. The administrators attempted to return the keys to the property to the landlords, but they refused to accept them. The landlords received information that doors had been left open at the property, and that anti-social behaviour was taking place on site so, in early October 2011, on the advice of the landlords’ insurers, security measures were put in place. On 23 November 2011 the administrators returned the keys to the landlords, offering a surrender by operation of law. The landlords accepted the keys because the administrators made it clear that if they were not accepted, they would be disposed of. 

Security remained a problem with youths hanging out at the property and windows being smashed in late 2011. In early 2012 the landlord’s insurers advised that the lower floor windows should be boarded up and alarms fitted. 

In April 2012 the landlord’s mortgagees appointed LPA receivers over the premises. The landlord’s receivers continued to claim rent arrears from the guarantors and set out in writing that the lease remained in existence although they also marketed the property.  

The judgment

When considering whether surrender by operation of law had taken place, the Judge confirmed that the conduct of both parties must be inconsistent with the continuation of the lease. The judge concluded that locks were changed to protect both the landlord’s interest and that of the tenant, that acceptance of the keys was consistent with a concern for the security of the property and did not indicate an intention to take possession of the property, that marketing the property did not demonstrate surrender as this was not the same as actually re-letting it. The Defendant was ordered to pay rent arrears and take a new lease of the property.  

This case reminds us that there is no single action by a landlord which will unequivocally determine whether there has been a surrender by operation of law; the court must look at all the circumstances to decide whether the landlord’s actions are inconsistent with the continuation of the tenancy. 

Padwick Properties Ltd v Punj Lloyd Ltd [2016] EWHC 502 (Ch )