A lease can be brought to an end by a surrender only where both landlord and tenant consent to it, whether that is by written agreement or by the actions of the parties. At a time when tenants may be more eager than ever to give up unprofitable premises, it is important that parties understand how and why leases may be brought to an end by their conduct.
A surrender by operation of law is a tenant delivering up possession and a landlord accepting it, inferred from the conduct of both parties. If it is clear from the conduct that both landlord and tenant unequivocally accept the lease being surrendered, then it will come to an end. Each party will be estopped from claiming that the lease is continuing.
Often, landlords will want to resist any inference that a lease has been surrendered, so the lease and the tenant’s obligations remain in place.
But what amounts to conduct unequivocally indicating a surrender by a tenant and acceptance by a landlord? A common example is a tenant having vacated the premises and handing back the keys to the landlord. The tenant vacating the premises is not generally considered to be enough to indicate an intention to surrender in itself, but the act of also giving up the keys is appropriate to demonstrate a tenant’s intention.
For a surrender to take effect by operation of law, it must also be accepted by the landlord, which can be inferred from a landlord’s conduct. A landlord may not actually intend the lease to come to an end, but its actions will be critical in determining whether it accepts a surrender.
If a tenant hands back keys, a landlord’s acceptance of them will on some occasions be enough to show acceptance of a surrender – taking back the keys can be inconsistent with the continuation of the lease, particularly where a landlord receives the keys and, for example, accesses the premises or otherwise deals with the premises outside the scope of the terms of the lease.
The grant of a new tenancy to a third party, for example, will also likely be enough to show that the landlord is treating the lease as having come to an end and therefore accepting the surrender.
Landlords must be wary of tenants seeking to hand back their lease by surrender by operation of law. The simplest advice to a landlord keen to keep a lease in place where the tenant is taking steps to give it up is to respond by making clear to the tenant that it does not accept a surrender of the lease, and that the lease remains in force. The landlord should ensure that its actions are consistent with the lease continuing, and leave no room for doubt in its conduct.
However, where premises are left empty, a landlord will naturally need to ensure they are safe and secure, and that may well require a landlord to take custody of keys and inspect the premises. In such circumstances, tenants should be made aware that the keys are being held only for the purposes of securing the property, and that the landlord does not accept a surrender.
A landlord may not actually intend the lease to come to an end, but its actions will be critical in determining whether it accepts a surrender.