Most dispositions of leases must be made by deed. However, a lease can be surrendered 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 the landlord may not have intended to end the lease.
Abandonment of the property will not suffice. A tenant that claims that a lease has been surrendered by operation of law must show that the landlord has accepted back the property. The landlord’s conduct must be unequivocal and must be inconsistent with the continuation of the lease.
What actions will convince the courts that a lease has been surrendered by operation of law? In Artworld Financial Corporation v Safaryan [2009] EWCA Civ 303; [2009] PLSCS 171, the tenants of a large residential property complained of various problems, before vacating it and returning the keys. The landlord and its solicitor made it clear in correspondence that the landlord regarded the lease as continuing and proceedings were issued to recover unpaid rent. The Court of Appeal noted that the landlord had redecorated, installed new furniture, replaced the curtains and allowed a family member to move in. It ruled that the cumulative effect of the landlord’s actions was inconsistent with its assertion that the lease had continued.
Each action, viewed in isolation and without regard to the others, might have been regarded as equivocal. Acceptance of keys to a property is an equivocal act, as is the preparation of a schedule of condition, because a landlord is entitled to record the state of premises when a tenant vacates so as to protect its own interests. Similarly, a landlord is entitled to repair premises, because landlords are entitled to protect and preserve the fabric of their properties.
The most significant factor in this case was that the landlord had allowed a family member to occupy the property for his own benefit and not, as was argued, as a caretaker to ensure the safety of the property. The landlord had treated the property as its own, which was inconsistent with the continuation of the tenancy. Consequently, the landlord was deprived of almost £500,000 in rent and the tenant was released from any further liability under the lease.
Each case will depend on its own facts, but this decision offers landlords a salutary reminder that actions speak louder than words. Landlords would therefore be well advised to seek legal advice when a tenant proffers the keys to a property and vacates.
However, landlords will also be reassured – particularly in these recessionary times – by the court’s recognition that, as a matter of practicality, one of the parties must hold the keys to prevent the absurdity of their being forever in transit between them. Landlords should avoid actions that amount to a resumption of possession, but they are entitled to protect their property interests without prejudicing their position – as long as their actions are consistent with the continuation of a lease.
Allyson Colby is a property law consultant
