Roger Hardwick

Registered with Property118.com
Saturday 29th June 2013


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Total Number of Property118 Comments: 7

Roger Hardwick

14:53 PM, 23rd February 2014
About 5 years ago

Deed of Surrender - Landlord and Tenant Q&A

Thanks, Romain.

Time to finish some of my less interesting fee paying work now, I think (procrastination is a wonderful thing)! ;)... Read More

Roger Hardwick

14:47 PM, 23rd February 2014
About 5 years ago

Deed of Surrender - Landlord and Tenant Q&A

Tessa's point about CPR 55.1(b) is a good one.

Without knowing for sure (I don't deal with possession proceedings at my firm), my guess would be that the claim should be issued with claim form N5, placing an 'X' in the box entitled "trespass", under the heading "Grounds for Possession".... Read More

Roger Hardwick

13:10 PM, 23rd February 2014
About 5 years ago

Deed of Surrender - Landlord and Tenant Q&A

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... Read More

Roger Hardwick

16:47 PM, 13th October 2013
About 6 years ago

Global Licence or a Standard Licence to let required by Freeholder - is this a scam?

Hi Joanne,

This is the problem with global licences of this nature; and one of the reasons I would never advise any of my leaseholder clients to enter into one.

It is arguable, at least.

Was the licence expressed to be personal to your previous landlord, or applicable throughout the term of the lease?

Does the licence stipulate that it is "collateral" to the lease? In relation to new tenancies (granted on or after 1st January 1996), any term, condition and obligation contained in a "collateral agreement" is a term, condition or obligation of the tenancy for the purposes of the LTCA 1995 (section 28, LTCA 1995), which will pass to an assignee or the freehold or leasehold titles on assignment (unless the covenant is expressed to be personal).

It is not clear from section 28 whether stating that an agreement is collateral to another is sufficient for it to be collateral for the purposes of the LTCA 1995.

Try the following arguments:

(i) Neither a variation of the lease nor a licence is a " registrable disposition"; and, accordingly, there is no requirement for it to be registered under section 4 or section 27 and schedule 2 of the Land Registration Act 2002.

Further, even if it is an "interest affecting a registered estate", a global licence of this nature is not an interest which is capable of being registered (as a unilateral or agreed notice) against SIMARC's title, because it is an interest "in respect of" a "restrictive covenant made between a lessor and lessee, so far as relating to the demised premises", which is excluded by virtue of s.33 of the 2002 Act.

The summarise: the global licence does not need to be registered against the freehold title (I assume it is the freehold title, rather than an intermediate leasehold title) to be binding on SIMARC.

(ii) You would presumably argue that the covenant itself has been permanently waived by agreement and the payment of consideration.

It is possible to waive a breach under licence, or for consideration (Stephens v Junior Army & Navy Stores [1914] 2 Ch. 516).

It is also possible to waive all future time of the right to complain of any breach of covenant under that provision. That is what you would have to argue here.

Where, for example, a covenant in a lease contained a covenant preventing the erection of buildings other than single storey villas, but high rise blocks had been erected on parts of the land over a period of over 45 years, it was held that the whole of the covenant had been abandoned, and could not be enforced by the landlord so as to prevent the erection of further high rise blocks (Att.-Gen. of Hong Kong v Fairfax [1997] 1 W.L.R. 149, PC).

I hope you have some success in arguing your case.... Read More

Roger Hardwick

9:13 AM, 13th September 2013
About 6 years ago

Old leases since 1945

Hi Tony,

There may be a number of solutions to your problem, which will all depend on the terms of the lease.

You need to check whether the lease contains (i) a right to enter the property and carry out an inspection (ans the right to recover the cost of that inspection); (ii) the right to serve a notice on the leaseholder requiring them to put the property back into a reasonable state of repair & condition once the inspection has been carried out; and (iii) the right to carry out the work yourself if the leaseholder continues to be in breach. These rights are usually contained in one clause, known sometimes as a "Jervis v Harris" clause.

I would also expect to see a right to re-enter/forfeit in the event of a breach.

Assuming you benefit from all of the above, I would recommend sending a surveyor in to inspect the property and draw up a schedule of dilapidations, together with a list of required works and estimated costs. That should be followed by a notice, requiring the leaseholder to carry out that work. If the leaseholder continues to fail to comply; either carry out the work yourself and charge it back tot he leaseholder (if you have the power and they have the finances) or apply to the First tier Tribunal (Property Chamber) for a determination that a breach has occurred, pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002; as a precursor to a notice before forfeiture and (ultimately, if they continue to fail to comply) and application to Court for possession.

It is very unlikely that you will actually get possession, as the leaseholder can always apply for relief, but relief will be granted on the condition that the property is put back into a reasonable state of repair, and that your costs are paid.

Kind regards,

Roger... Read More