Most dispositions of leases must be made by deed. However, it is possible to surrender a lease by operation of law. Surrenders by operation of law depend on the parties’ conduct, and not their intentions. The rules are based on the doctrine of estoppel, and will be applied even though one of the parties may not have appreciated the effect of its actions.
Obichukwu v London Enfield Borough Council [2015] UKUT 64 (LC); [2015] PLSCS 56 concerned a business tenancy of premises which, together with other properties, were the subject of a compulsory purchase order. On the day of the public enquiry to consider objections to the order, the tenant withdrew her objection in the belief that the authority – which was also her landlord – would negotiate a settlement with her.
The tenant wrote to the authority a week later explaining that its proposals had taken their toll on her, and her business, and that she had decided to return the keys to the premises immediately – which she did the following day. The authority accepted the keys and, when the tenant next raised the question of compensation, claimed that she had surrendered the lease by operation of law and, as a result, had lost all entitlement to compensation.
The tribunal accepted that the tenant had believed that she was obliged to hand the premises back to her landlord and that she had not intended to abandon her right to compensation. However, the parties had not actually reached any agreement at the public enquiry and, if they had reached an agreement for the surrender of the lease, it would not have had any contractual effect.
Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides that contracts for the sale or disposition of an interest in land (which includes agreements to surrender leases) must be made in writing, must incorporate all the terms expressly agreed by the parties, and must be signed by or on behalf of the parties. There was no such document here. Furthermore, an agreement for the surrender of a business tenancy that is protected by the Landlord and Tenant Act 1954 is void, unless it complies with certain statutory formalities. There was no such compliance here.
The tribunal also accepted that any agreement to negotiate a settlement would have constituted an agreement to agree – and the House of Lords’ decision in Walford v Miles [1992] 2 AC 128 confirms that agreements to agree are unenforceable.
However, there had been a surrender by operation of law because the unqualified delivery and acceptance of possession was inconsistent with the continuation of the tenancy. Indeed, the tenant had not even tried to argue that the lease had survived – and it was too late to claim compensation now. The only representation that the authority had made was that it was willing to negotiate a settlement, but there was no enforceable promise to pay compensation, no bargain was struck, and there was no longer any lease to sell.
The tenant’s arguments that she had had a legitimate expectation that she would be compensated were equally unsuccessful for the reasons explained by John Martin in PP 2015/49.
Allyson Colby is a property law consultant
