Deed of Surrender – Landlord and Tenant Q&A

I will be asking a leaving tenant to sign a "Declaration of Surrender" as and when he leaves, tomorrow all going well. This is the same tenant I proposed should surrender possession when he was held on remand in prison. If he had accepted I would have had a document drawn up by a solicitor, probably LandlordAction who where handling the normal possession proceedings at the time.

I have also had a tenant held in their mother country for much longer than expected, we ended possession remotely with exchange of signed documents. I can't remember what form it took, but it worked because the process was amicable.

I have also experienced tenants failing to move out as agreed because their next landlord delayed handover of keys. I then had to delay handover to my incoming tenants. There was no documentation involved this time but fortunately this situation was resolved amicably too.

Incidentally, where a landlord finds themselves in this awkward position can they claim that their ability to fulfill the AST contract to the new tenants has been "Frustrated" by the uncontrollable actions of current tenants failing to vacate as agreed. Would a Deed of Surrender help here?

Reply to the comment left by "Tessa Shepperson" at "23/02/2014 - 10:24":

Tessa, what do you mean by 'standard possession procedure'?
If a tenant remains after the end of the tenancy he is a trespasser, and his situation is similar, I would think to a licensee whose license has ended: He occupies the property without consent.

Certainly the accelerated procedure for ASTs is not possible, as there is no AST and no s.21 notice (which can no longer be served),
That leaves the standard procedure. The N5 form does include 'trespass' as a ground.

I'm a bit surprised at the comments re. Deeds of Surrender, as they are not fancy at all and a very standard way to surrender a lease/tenancy, and are documented all over the place. Actually in general they are THE proper way to surrender a lease/tenancy (as surrender by operation of law is always problematic).

For a tenancy with a term of less than 3 years they might not be mandatory because such tenancies are not required to be executed by deed. Hence a simple document or letter might be enough.
That' why I called such deed a "bolt and braces" approach.

Won't be a frustrated contract Steve. It has to be actions totally outside the control of both parties to be a frustrated contract

@ Renovate

None because he won't sign the DoS will he?

S8 or stuck

Reply to the comment left by "Steve Masters" at "23/02/2014 - 11:59":

Steve, as an aside to this, when you talk about being unable to fulfil the AST on incoming tenants, do you get them to sign on day of occupation or before? I was always told that you only sign the AST on the day and when the money is paid rather than in advance. By signing in advance you then become liable for the tenants accommodation if you cannot provide the property.

Reply to the comment left by "Gary Nock" at "23/02/2014 - 12:15":

Industry Observer: But in original poster Roberts situation where the current tenants have broken the terms of the signed Deed of Surrender then surely this is totally outside the control of the landlord and new tenants, hence the 1737 act double rent etc.

Gary: Normally I like to leave a buffer period of a few days between outgoing and incoming tenants to clean/repair and help in just this very situation. I normally only sign new AST once I have possession or on the moving in day. On this occasion both sets of tenants wanted back to back handover. Sometimes $%!¬ happens.

Reply to the comment left by "Romain " at "23/02/2014 - 12:10":

Romain: There are separate forms for use when bringing a claim against trespassers. This is what the civil procedure rules say (CPR rule 55.1) about them:

(b) ‘a possession claim against trespassers’ means a claim for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without the consent of a person entitled to possession of that land but does not include a claim against a tenant or sub-tenant whether his tenancy has been terminated or not;

So if a tenant has signed a deed of surrender and then refuses to go, you can't use the 'squatters procedure'.

Reply to the comment left by "Tessa Shepperson" at "23/02/2014 - 12:44":

Thanks for the reference, Tessa.

So N5 form with 'trespass' ground should most likely be the way.

All,

Mark has asked me to comment on this thread. My main area of expertise is long residential leases, but I know a thing or two about ASTs, so here goes.

My bold and italics have been removed, so I will use capitals for headings.

WHY WOULD A TENANT AGREE TO A SURRENDER?

I come across surrenders quite frequently in the case of long residential leases; mostly in the context of lease extensions, which take effect as a surrender and re-grant, either expressly, or by operation of law. I understand that they are also relatively common in the case of commercial leases (where the landlord effectively buys back the remainder of the term), although admittedly that is not my field.

In the case of ASTs, I know at least one of my clients (a national provider of student letting) regularly negotiates surrenders with its tenants, offering them financial incentives to terminate their tenancy prior to the expiration of the fixed term, or prior to the point at which their statutory periodic tenancy would otherwise come to an end (following the service of a s.21 notice). They do this in order to gain possession of the property urgently for redevelopment or refurbishment purposes.

SURRENDERS (GENERALLY)

The surrender of a lease by a tenant to its immediate landlord is a consensual arrangement between the landlord and the tenant. It results in the vesting of the tenant's estate in the landlord and the extinguishment of the term of the lease (Fairweather v St Marylebone [1963] AC 510).

A surrender may be effected (i) expressly or (ii) by operation of law.

An express surrender must be effected by deed (in accordance with s.1, Law of Property (Miscellaneous Provisions) Act 1989 i.e. in the presence of a witness or, in the case of a company, in any one of the manners specified in s.44 of the Companies Act 2006), otherwise it is void (section 52, Law of Property Act 1925); however, a surrender by operation of law is inferred where the conduct of the landlord and the tenant amounts to an acknowledgment that the tenancy has ended or is otherwise inconsistent with the continuation of the tenancy. It is conceivable therefore that a form of surrender which is not executed as a deed will nevertheless give rise to a surrender, by evidencing the parties acknowledgement that the tenancy has ended (and, if it is made in writing and signed by both parties – s.2, 1989 Act – it will take effect as an agreement to surrender).

When made by deed:
(i) the surrender must take effect immediately. If it purports to take effect at a later date it will operate as an agreement to surrender at that date.
(ii) A deed of surrender is usually made between the landlord and the tenant. The tenant's guarantor may also be a party (but need not be).
(iii) Since 1 June 2004, there is no longer a requirement that the tenant must have been in occupation under the tenancy for at least one month for the surrender to be valid (Schedule 6, RRO 2003). Any immediate surrender, no matter how long the tenant has been in occupation will, therefore, be valid.
(iv) A surrender by joint tenants must be made by all of them

A surrender by operation of law is inferred from the conduct of the landlord and the tenant. It is based on the doctrine of estoppel, rather than the actual intention of the parties (Allen v Rochdale BC [2000] 2 WLR 182). The conduct must show both a handing back of the property by the tenant and an acceptance by the landlord. Mere vacation of the property by the tenant will not necessarily be sufficient. The conduct must be unequivocal.

A surrender may be effected even if the landlord does not intend to end the lease. However, in such circumstances, a court should hold that an act has effect as a surrender only if that act is incapable of having any other effect.

Conduct that is inconsistent with the continuation of the lease will amount to a surrender. Prime examples of this are where the landlord purports to extend the term of the lease or add land to the demise. Neither of these can be done if the lease continues to exist: there would, purportedly, be two leases of the same land for the same term and both taking effect in possession. The situation can only be explained as a surrender of the lease and the grant of a new lease for the extended term or demise (Friends Provident v British Railways Board [1996] 1 All ER 336).

Other conduct of the landlord and tenant where a surrender by operation of law has been inferred includes:

(i) The landlord granting a tenancy at will to the existing tenant (Gibbs Mew v Gemmell [1999] 1 EGLR 43).

(ii) The tenant vacating the property and the landlord going into beneficial occupation of the property (Bird v Defonvielle (1846) 2 Car & K 415) or allowing another to reside at the property for several weeks and carrying out redecoration (Artworld Financial Corporation v Safaryan and others [2009] EWCA Civ 303).

(iii) The (head) landlord accepting rent from undertenants who have been directed by the tenant to pay rent to the (head) landlord (Gray v Balls (1861) 5 LT 395).

Conduct where a surrender by operation of law has not been inferred includes:

(i) The landlord accepting the keys by mistake or without prejudice to the continued existence of the lease (Proudreed v Microgen [1996] 1 EGLR 89 and Re: Panther Lead Co [1896] 1 Ch 978).

(ii) The tenant abandoning part of the property (Chamberlain v Scalley (1994) 26 HLR 26)

(iii) The landlord changing the locks of the property to secure it against intruders while maintaining a claim for rent against the tenant (Relvok Properties v Dixon (1973) 25 P&CR 1).

(iv) The landlord allowing a third party to occupy the property whilst negotiating the terms of a new lease that was not completed. The landlord unsuccessfully argued that the occupier had occupied the property as a tenant at will during the lease negotiations, which brought about a surrender of the lease by operation of law (QFS Scaffolding Limited v Sable and another [2010] EWCA Civ 68).

(v) The landlord letting the property to a third party at the request of the (original) tenant (Nickells v Atherstone (1847) 10 QB 944).

SURRENDERS, IN THE CONTEXT OF ASTs

The method by which an AST can be terminated (and the rules governing its termination) depends on a variety of factors, e.g.:
(i) Whether the termination is intended to take effect during the fixed term, or after the expiration of the fixed term (at which point a statutory periodic tenancy will have come into being); and
(ii) Whether the termination is a unilateral act of the landlord or tenant respectively; or effected by agreement between the parties.

A number of people have queried whether it is necessary to serve a s.21 notice, notwithstanding the surrender. In my view, it is not, unless (following the surrender) the landlord inadvertently creates a new tenancy (implied periodic or otherwise, but not a statutory periodic pursuant to s.5, HA 1988 – see below).

It is worth citing the first two subsections of s.5 of the Housing Act 1988, at this point:

“5. Security of tenure.

(1) An assured tenancy cannot be brought to an end by the landlord except by—
(a) obtaining—
(i) an order of the court for possession of the dwelling-house under section 7 or 21, and
(ii) the execution of the order,
(b) obtaining an order of the court under section 6A (demotion order), or
(c) in the case of a fixed term tenancy which contains power for the landlord to determine the tenancy in certain circumstances, by the exercise of that power, .
and, accordingly, the service by the landlord of a notice to quit is of no effect in relation to a periodic assured tenancy.

(1A) Where an order of the court for possession of the dwelling-house is obtained, the tenancy ends when the order is executed.

(2) If an assured tenancy which is a fixed term tenancy comes to an end otherwise than by virtue of—
(a) an order of the court of the kind mentioned in subsection (1)(a) or (b) or any other order of the court, or
(b) a surrender or other action on the part of the tenant,
then, subject to section 7 and Chapter II below, the tenant shall be entitled to remain in possession of the dwelling-house let under that tenancy and, subject to subsection (4) below, his right to possession shall depend upon a periodic tenancy arising by virtue of this section.”

First, s.5(1) only restricts the manner in which a landlord can unilaterally terminate an assured (and, by implication, an assured shorthold) tenancy. It does not restrict the manner in which a tenant may terminate the tenancy (after the expiration of the fixed term – as a matter of contract, he cannot terminate the tenancy during the fixed term without the landlord’s consent, in the absence of a break clause or something similar); nor does it prevent the parties from agreeing to a surrender.

Secondly, the legislators clearly contemplated that the parties to an assured tenancy may wish to agree to a surrender of that tenancy (see s.5(2)(b), above). We also know, by virtue of s.5(2)(b), that a statutory periodic tenancy will not arise (by virtue of s.5(2)) where the tenancy has been surrendered.

The one caveat is s.5(5), which renders unenforceable any obligation, surrender, notice to quite etc. entered into by the tenant on or before the tenancy (inc. statutory periodic tenancy) is entered into, which would cause the tenancy to come to an end, with the exception of any right of pre-emption which is exercisable by the landlord which is exercisable in circumstances where the tenant indicates his desire to dispose of the tenancy, at market value (s.5(5A)).

OBTAINING POSSESSION (WHERE THE TENANT DOES NOT LEAVE, FOLLOWING A SURRENDER

The landlord should be careful not to create an implied periodic tenancy by conduct. A periodic tenancy (e.g. month to month) or a lease with a fixed term of under 3 years can be created by simple contract or even by conduct (this is known as a “parole lease” – a lease with a term of more than 3 years must be made by deed, and a lease with a fixed term of more than 7 years must be registered at the Land Registry). If the landlord accepts rent from the tenant after the surrender or does anything else which might infer the existence of a new tenancy, a new tenancy may well come into being, in which case (without a new surrender), the landlord will have to terminate the tenancy in one of the methods specified in s.5(1) of the 1988 Act (most likely, a s.21 notice).

Assuming the surrender was expressed to take effect immediately, and did not take effect as an agreement to surrender at a later date; and assuming no further tenancy came into existence; in theory, once terminated, the property reverts to the landlord and the tenant should vacate.

If the tenant does not vacate, the landlord must consider how to gain possession. I am straying slightly beyond my main area specialism here, but I would think, in view of s.1 of the Protection from Eviction Act 1977 (the definition of “residential occupier” is fairly broad), it would be eminently sensible to apply to Court for possession and, if necessary, arrange for bailiffs to be sent to the propery to exectue the warrant for possession.

Roger

Reply to the comment left by "Roger Hardwick" at "23/02/2014 - 13:10":

Outstanding post, Roger. Thank you.