A surrender of a lease can occur in two ways; either expressly or by operation of law. An express surrender should be made by deed and outline the end of the lease unequivocally, with both the landlord and tenant agreeing to the surrender.
Surrendering a lease by operation of law poses numerous issues.
What effects a surrender by operation of law?
Surrender by operation of law occurs when both the landlord and the tenant act in a way that is inconsistent with the continuance of the lease. In practice, it can be difficult to ascertain whether the acts of either party are sufficient to indicate such an intention. A tenant will commonly return the keys to the landlord at the end of its lease. This in itself will not constitute surrender by operation of law, because the landlord may not agree to the surrender. This can lead to a situation where the keys are passed back and forth between the landlord and the tenant. For surrender by operation of law to take effect the landlord must, unequivocally, accept the return of the keys as surrender.
The recent case of Levett-Dunn v NHS Property Services focused on the proper service of break notices, but also set out guidance on what actions will give rise to surrender by operation of law. The tenant successfully argued that the re-letting of the property by the landlord amounted to surrender by operation of law. In reaching its decision, the court considered other acts carried out before the re-letting and held that none of the following amounted to a surrender:
The acceptance of the keys, by the landlord’s agent, on a without prejudice basis.
Correspondence regarding liability for payment of utilities.
Merely marketing the premises for re-letting, as this could be ended at any time.
When determining whether conduct amounts to surrender by operation of law, it is clear that the courts will consider the actions of the landlord and tenant as a whole and that single events will be considered in the context of the broader circumstances of the case.
Tenants seeking to assert surrender by operation of law must ensure that they do not inadvertently prevent surrender by exercising their rights under a lease, for example by entering the property to inspect or repair or acting to protect or preserve the property by taking security measures or carrying out repairs. Landlords seeking to avoid releasing tenants of liability by surrender should set clearly out their position that the lease continues in any communications with the tenant.