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Surrender by operation of law

This page contains the reports of two cases. The first deals with the situation where the tenant abandons the premises and the landlord simply does nothing. Is the tenant then entitled to claim that the landlord has surrendered? The short answer is no, even if the rent is not paid.

The second case is concerned with a situation where a landlord's acts did amount to a surrender - even though he said he wasn't surrendering. It is a very useful case as it contains a very clear restatement of the principles that apply when one is saying that there has been a surrender by operation of law.


Abandonment by tenant

Bellcourt Estates Ltd v Adesina
[2005] EWCA Civ 208

Inaction by tenant

Summary

The CA approved the following statement of the law at page 849 of the 6th edition of Megarry and Wade: The Law of Real Property:
    "Abandonment of the premises by the tenant without more (even if rent is unpaid) is not a surrender, because the landlord may wish the tenant's liability to continue. Nor is the delivery of the key of the premises to the landlord enough by itself. Even if he accepts it, it must be shown that he did so with the intention of determining the tenancy ... and not merely because he had no alternative."
Facts

The property had been let to T in August 2000. T never paid any rent and left in November 2000. L knew this and made no claim for rent at the next quarter day. The property was then left empty for many months because the landlord was too busy to deal with it. The judge held that this operated as a surrender of the tenancy on or about that date, so that rent was not payable thereafter. L appealed:

Held

There was no surrender. Peter Gibson LJ:
    "30. The doctrine of surrender by operation of law is founded on the principle of estoppel, in that the parties must have acted towards each other in a way which is inconsistent with the continuation of the tenancy. That imposes a high threshold which must be crossed if the tenant is to be held to have surrendered and the landlord is to be held to have accepted the surrender.

    31. The effective re-delivery of possession by the tenant and its acceptance by the landlord are vital. Thus there will be a surrender when the tenant returns the keys of the premises and the landlord accepts them in circumstances which indicate that the tenancy thereafter no longer exists. The landlord must take possession in such a manner as to estop him from denying that the tenancy is at an end.

    32. the facts relied on [in this case], being omissions on the part of the landlord, do not amount to unequivocal conduct by the landlord accepting any surrender. No authority has been shown to us in which mere inaction is enough. Griffiths LJ in Preston Borough Council v Fairclough (1982) 8 HLR 70, at page 73, does say that:

      'If it could be shown that a tenant had left owing a very substantial sum of money and had been absent for a substantial time, then an application by the landlord under Order 24 might well be sufficient for a court to regard the tenancy as surrendered by operation of law ...'

    33. To the extent that that tentative suggestion is based on the failure by the landlord to assert his rights for a substantial time, it is one about which, with all respect to Griffiths LJ, I would have serious reservations. In my judgment mere inaction would not be unequivocal conduct by the landlord. However, every case must turn on its own particular facts. It is sufficient to say that in the present case it has not been shown that any surrender has been accepted by the claimant.
Comment

Note that this is a case where the tenant is seeking to assert that there has been surrender so as to avoid continuing liability to pay rent. Where the landlord asserts that there has been a surrender it will usually be much easier for him to establish that he has done an act accepting the tenants giving up of the property.


Re-statement of principles

Landlord acts amounted to acceptance of surrender - even though he said he wasn't

Artworld Financial Corporation v Safaryan
[2009] EWCA Civ 303

Summary

Notwithstanding a statement by the landlord that it was not accepting a surrender its actions constituted such a surrender – by operation of law. The case contains a useful reminder of the principles that apply.

Facts

In September 2004, the landlord (L) let a substantial property to the tenant (T) for a term of three years at a rent of £390,000 a year. T was not happy with the property and complained about problems with the central heating and swimming pool. In May 2006, T moved out returning the keys to L. Correspondence from L (and its solicitors) made it plain that it saw the lease as continuing and did not intend to accept a surrender. Nonetheless, after the keys were returned, L:
  • Arranged for a "check-out" report and inventory.
  • Entered the premises to inspect them.
  • Carried out necessary repairs.
  • Kept the garden tidy.
  • Redecorated part of the property.
  • Parked cars on the drive.
  • Returned some furniture and re-hung some curtains, which had been put into storage prior to the grant of the lease.

  • Sought to re-let the property.
In addition, L allowed members of its family to use the premises for some months and move items of their furniture into the property.

Issue

L did not accept that the lease had come to an end and sought to recover from T £487,500 rent for the remaining 15 months of the term. Initially, T claimed that L’s failure to repair entitled it to repudiate the lease, but once proceedings were commenced, T defended the action on the basis that L had acted in such a way as to amount to an acceptance of a surrender of the lease. Had a surrender in fact taken place?

Decision

Unanimously upholding the first instance decision of HHJ Hazel Marshall QC (and quoting extensively from her judgment) the Court of Appeal held that there had been a surrender by operation of law.

The court made it clear that a surrender of a lease by operation of law occurs where the parties have acted towards each other in a way that is inconsistent with the continuation of the tenancy. Surrender by operation of law does not depend on the intention of the parties, but rather on their conduct, and is founded in estoppel. The burden of proof lies on the party claiming that there has been a surrender.

As to L’s assertions (through his solicitors) that the lease was on foot, the court considered the judge had dealt with that point correctly when she said:
    “In my judgment the question whether there has been a deemed surrender by operation of law does not depend on the landlord’s stated intention, but on the intention demonstrated on an objective basis by its conduct as a whole….this includes both what it says and what it does, and what it says may assist in interpreting the true effect of acts which might otherwise be equivocal, but it is not open to the landlord to turn black into white merely by assertion. …. where aspects of the landlord’s conduct are contradictory the court must look at that conduct as a whole, and decide what is its real effect.” (para 18, CA)
The court accepted that, if a tenant vacates prior to termination of a tenancy, there are various acts a landlord can take to protect its interests that do not amount to accepting a surrender; for example, it may accept the keys so it can gain access and it can enter to carry out repairs.

Looking at the steps L had taken, the court quoted at length from the first instance judgement that each individual act, of itself, may not amount to unequivocal resumption of possession, but that it is necessary to consider the totality of the landlord’s conduct, rather than individual acts, to decide whether the landlord’s conduct is inconsistent with the lease still being in existence.

Principles of surrender by operation of law

Dyson LJ (para 29) agreeing with the trial judge, quoted at length from her judgement:
    "(1) The issue of whether there has been a surrender by operation of law after a tenant's abandonment of the leased premises must be determined by evaluating the effect of the landlord's conduct as a whole (cf London Borough of Brent v Sharma (1992) 25 HLR 257 at 259). I accept Mr Kremen's argument that the totality of such acts can amount to a resumption of possession even though individual acts might each be only equivocal. With this in mind –

    (2) The test is whether the landlord's conduct is 'so' inconsistent (Oastler v Henderson 1877 2 QBD 575 at 577) with the continuation of the tenant's lease that it could only be justified as being lawful on the basis that the landlord has accepted the tenant's implied offer to give back possession, and has taken possession of the premises beneficially for himself.

    (3) Accepting back the keys without more will always be equivocal. As a matter of practicality and common sense, one party has to hold the keys to prevent an absurd situation in which they are passed back and forth because neither party wants to risk it being suggested that it has made an admission by holding them.

    (4) Any act of the landlord which is consistent with its rights under the lease, such as entering the premises to inspect or to repair them, will not in itself give rise to a surrender because, by definition, it is not inconsistent with the lease continuing.

    (5) Any further act of the landlord which amounts to protecting or preserving the property, such as taking security measures or doing necessary repairs, will not in itself give rise to a surrender because such self-help, necessary to preserve the landlord's interest in the value of his property, is a reasonable response to the tenant's evinced intention not to perform the obligations of the tenancy: cf McDougall's Catering Foods Ltd v BSE Trading Ltd 1998 P & CR 312; Relvok Properties Ltd v Dixon (1972) 25 P & CR 1, at p 7.

    (6) Similarly, any act of the landlord which amounts to the landlord's performing the tenant's covenants under the lease, such as keeping the garden tidy, would not necessarily amount to a resumption of possession as it is not inconsistent with holding the defaulting tenant to performing the lease.

    (7) Any further act of the landlord referable to the landlord's seeking to re-let the premises will not necessarily give rise to a surrender by operation of law, as it is no more than what the landlord might reasonably be expected to do in the circumstance for the potential benefit of all parties: Oastler v Henderson [1877] 2 QBD 575. The landlord must be entitled to seek to mitigate the damage caused in reality (even if not yet technically in law so long as the lease remains extant) by the tenant's abandoning the lease, by seeking to obtain another tenant, without thereby losing his rights against the original tenant if he is unable to do so.

    (8) However, if the landlord goes further and uses the premises for his own benefit beyond the totally trivial - and certainly, in my judgment, if such use amounts to occupation of the premises - then he re-takes possession of the premises inconsistently with the continuance of the lease. This will give rise to a surrender by operation of law, since it is only on the basis of having accepted such a surrender that the landlord's acts would be lawful."
Conclusion

So, if a landlord occupies the property and/or uses it for its own benefit, then it is highly likely that such action will be regarded as the landlord taking back possession and will give rise to a surrender of the lease. Here the Court of Appeal agreed with the trial judge that L had taken back possession of the property and in doing so had unequivocally accepted the surrender of the lease.


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