There is a legal rule called ‘implied surrender’ or ‘surrender by operation of law’.
This says that if a party to a tenancy or lease acts in a way that is inconsistent with an intention to continue with the lease – that is deemed to be an ‘offer to surrender’ which the landlord can accept.
However – what is acceptance? I have recently come across a case which makes the point that the unequivocal conduct of BOTH parties is required.
The case was heard in the Chancery Division of the High Court earlier this year.
It involved a tenant of commercial premises – the story is a bit complex but the nub of the matter is that the tenant became insolvent and eventually the property was vacated.
The landlord was given the keys, made the property secure and put it back on the market briefly. However, it remained empty.
Some time later the guarantors were approached and asked to pay the outstanding rent. The guarantors argued that they were not liable as the lease had been ended by operation of law.
However the court disagreed.
- The receipt and acceptance of the keys was not sufficient to end the tenancy as the landlords only took them to maintain security of the property – a fact that they had made clear to the tenants, and
- The attempt to re-let the property did not give rise to a surrender by operation of law, although things would have been different if it had actually be re-let.
Advice for residential landlords, tenants and guarantors
Although this case is a commercial property one, the same rules will apply to residential lets. Points to take away are:
For landlords – when a tenant hands the keys back before moving out prior to the end of the fixed term – make it clear that you are not agreeing to end the tenancy (assuming you are not), but are just accepting the keys so you can keep the property secure
For tenants – don’t just move out. Try to find a replacement tenant and make sure that a new tenancy is actually given to them. You will have to pay for the landlord’s expenses but it will be cheaper than having to pay rent for the rest of the term.
For guarantors – keep tabs on people you guarantee. If you learn that they have moved out – check to see whether the tenancy has ended or not.
In actual fact, where tenants move out because they do not have the money to pay the rent, many landlords just accept the situation and treat the tenancy as being at an end. But they don’t have to.
There is no obligation on landlords to mitigate their losses if a tenant moves out mid-term – they are quite within their rights just to leave the property empty and bring a claim for unpaid rent against the tenants – and their guarantors – either after the fixed term has come to an end or after they have successfully re-let the property, or at any time before then.
And they can also bring this claim at any time during the next six years (after when the claim will become ‘statute barred’).
So, tenants – you need to be careful to protect your position. Just moving out is not enough to end your tenancy. It may be a lot more expensive than you think.