Surrender of Tenancy Agreement
Make Text BiggerUPDATED – 28th May 2019 – this is still as valid today as it was when first published on 21st August 2014.
I have just helped my brother to draft a Surrender of Tenancy Agreement, you can download a copy at the foot of this article, but the story behind it is an interesting one too.
The property was purchased at auction a few years ago, it was an absolute bargain but it’s 250 miles away from where he lives. It was refurbished but rather than sell it and make a quick profit he decided to hold it as an investment. Note that my brother is a property developer and pays the additional rate of tax so if the property had been flipped the profits made would have been taxed at the additional rate as trading income, OUCH! By letting it as an investment and selling it later on the profits would be taxed at the 28% CGT band, less the annual CGT exemption for him and his wife – no brainer!
The first set of tenants were great and stayed just over two years. The property was re-advertised but the second time around the tenant demand was lower. My brother was ready to go on a four week holiday and had considered selling the property on his return. However, a few days before he left a couple made an application to rent the property. The basis of referencing was that rent would be 50/50. She passed referencing but he failed. A commercial decision was taken to accept them anyway subject to 6 weeks deposit. Better than a void period right?
A month into the tenancy Mrs Tenant cheated on Mr Tenant so he left her and went back to Mum. Rent payments became sporadic and she would text day and night with excuses and looking for emotional support. Arrears never quite got to two months so there was little that could be done in terms of serving notice and possibly having to apply apply to the Courts for a possession order until the fixed tenancy period expired. Fortunately, she decided that enough was enough after four months, she didn’t like being in debt and wanted to go back to Mum and surrender her tenancy. A lucky escape for my brother to say the least, he was only too keen to agree!
An agreement was reached amicably, i.e. the tenants would be released early from the tenancy and my brother would keep the deposit to offset the majority of the rent arrears. This still left a few hundred pounds of arrears but my brother agreed to write that off. Thankfully she was very clean and tidy so the flat is fine. It’s now on the market for sale and will probably be snapped up by another landlord or first time buyer in the area. It’s a cracking little property. [UPDATE – the property was indeed sold very quickly to another investor]
Being a shrewd landlord my brother wanted to get everything properly documented so that nothing could come back to haunt him further down the line, e.g. husband learning that wife had moved out and him moving back in or claiming illegal eviction etc. I helped my bother to put the agreement together and he’s buying the beer this weekend – he doesn’t know that yet though 😉
By the way, I did run the agreement past my barrister friends, just in case you’re wondering. He gave it the thumbs up with no suggested amendments **oh how I wish I knew how to do a smug smiley right now**
If you would like a copy of the Tenancy Surrender Agreement for your files, just in case you ever encounter a similar issue, then you can download it by completing the form below. My brother wants nothing out of this but he has asked me to charge £5 per download for the agreement template and for us to use the money to subsidise the running costs of Property118.
You probably don’t need the template today but why not download it anyway? You will be helping to support Property118 and you will have it on file if you ever need it. If you wait until you need it then you may struggle to find this article again so do it now 🙂 It’s only a fiver!
Tenancy Surrender Agreement Download
EDITORS FURTHER NOTE
The heated debate with “Industry Observer” was eventually concluded on page 5 of the comments thread!
Industry Observer
10:07 AM, 29th September 2014, About 10 years ago
The statement that as part of the joint signing and as Romain rightly points out, the surrender propoed by the tenant being accepted by the landlord, a condition of that acceptance seems, unless I misunderstand, that the landlord retains the deposit.
That is why I ask is that in every case, standard 'clause' in the agreement letter, or was that just a one off in this specific case?
If a tenant simply wants releasing early say on November 9th, signs a mutual letter today to say they will pay the rent to that date and the C Tax and give the property back in a condition that would otherwise entitle them to receive their deposit back in full, if the Landlord as a condition of the agreement (IN EVERY CASE) is going to make it a condition they retain the deposit, I'd say that was a bonus for the landlord.
And probably unenforceable under Scheme Rules, for certain with DPS.
Or is the intention this agreement to surrender when submitted to DPS instead of a mutually signed release form, will compel DPS to release the deposit to the Landlord?
Mark Alexander - Founder of Property118
14:18 PM, 29th September 2014, About 10 years ago
Reply to the comment left by "Industry Observer " at "29/09/2014 - 10:07":
Please re-read the article.
The only reason that the landlord is retaining the deposit in this instance is that rent arrears exceed the deposit amount. The same could apply to damages, subject to agreement of course.
If there were no damages or arrears then the only possible additional claim on the deposit that I can think of might be for the cost of re-letting the property and any void period relating thereto, and only if the surrender is within the fixed period of course. Now I fully accept this could be problematic on the basis that the cost of re-letting and any void period would be difficult to calculate at the point of the surrender, unless a new tenant was to move in on the day of surrender of course. That is a highly unlikely scenario though and certainly wasn't applicable to the case in point.
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Industry Observer
15:19 PM, 29th September 2014, About 10 years ago
I have re-read it Mark and harsh cases make bad law. So the answer to my query on agreement content is that it is not a standard document but will vary every time?
The costs for re-letting and void periods in my view would be very unlikely to be allowed for two reasons.
First they would almost certainly not be listed in the deduction reasons clauses in the tenancy and thus not be allowed by a Scheme. If they were in the agreement my guess is they would be struck out under an Unfair Contract Terms challenge.
Second as you recognise how you can anticipate void periods and make any calculation to compensate for them because the Landlord is accepting the risk of a void period by allowing the surrender (back to Romain's mutual agreement point). If you attempt to how do you quantify the alleged loss - how many weeks or months lost rent and how much in additional fees?
This is the same argument that will not be allowed for a Landlord on an alleged sale loss. Had the tenant vacated end of notice instead of sitting tight and waiting for the Council to re-house them the Landlord says they could have sold the house for an extra £5000 - could he, where is the proof?
I just don't see how you can try to calculate and compensate for unknown costs in advance of them arising (as opposed to arrears that vastly outweigh the deposit)unless the agreement to release is made very close to the vacating date and a new tenant has been found. As you say that scenario is unlikely to occur, or not very often.
But then in my experience neither is a tenant needing out of a fixed term agreement unless it still has many months to run.
Mark Alexander - Founder of Property118
15:39 PM, 29th September 2014, About 10 years ago
Reply to the comment left by "Industry Observer " at "29/09/2014 - 15:19":
The agreement template allows for adjustment as required, e.g. sentences to be removed and fields to be completed as necessary.
I don't get your point with regards to unfair contract terms. Remember, it is the tenant who is surrendering early into a fixed term contract. The case law on recompense to landlords is very well established in this area. I am amazed that you think it is an infrequent occurrence, I can assure you that it is very common indeed. Why else would there have been so much interest in this thread and so many downloads?
Your second point is just a re-hash of my words, i.e. you are re-stating what I said in my previous post, hence I agree with you on that point 🙂
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Industry Observer
16:07 PM, 29th September 2014, About 10 years ago
Mark
The Case Law is very clear on commercial situations, as far as I am aware very much less so on residential.
Any you can quote on residential beyond stating the obvious that the old tenant continues to discharge the financial obligations until the new tenant takes them over appreciated. I'd be fascinated to see any Case Law that says a tenant signing away their legal rights is an enforceable contract.
Appreciate it is the tenant seeking to surrender early - but it is the landlord that is setting out the terms in effect in a contract so those terms would have to comply with Unfair Contract Terms provisions.
Mark Alexander - Founder of Property118
16:19 PM, 29th September 2014, About 10 years ago
Reply to the comment left by "Industry Observer " at "29/09/2014 - 16:07":
Agreed on all points.
Tenants are not being asked to sign away their legal rights, what leads you to think they might be?
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Industry Observer
16:31 PM, 29th September 2014, About 10 years ago
Their right to raise a dispute?
Or maybe counterclaim later for Landlord failing to discharge s11 repairing obligations?
I have used a letter for this purpose, varied each time as yours can be for individual circumstances.
It has never entered my head to include getting the tenant to sign in advance that they release the deposit to the landlord. As I said what happens if it is held by DPS which it will be for many self managing landlords, and a mutual release form agreeing to deductiuons is needed?
Mark Alexander - Founder of Property118
17:05 PM, 29th September 2014, About 10 years ago
Reply to the comment left by "Industry Observer " at "29/09/2014 - 16:31":
If the deposit is held by DPS the normal procedures will apply. The letter documenting the agreement between landlord and tenant simply does what it says on the tin and may be used in evidence if required.
If a tenant had a counter-claim or intended to raise a further dispute why would they counter-sign the Tenancy Surrender Agreement? They wouldn't would they. There is a remote possibility the tenant could swear that they signed the Tenancy Surrender Agreement under duress whilst their wicked landlord held them at gunpoint but they could also say the same of signing the AST in the first place!
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Industry Observer
17:24 PM, 29th September 2014, About 10 years ago
Agree with your first comment 100%
On the second one I meant repairing obligations that arose after the signing, unlikely but possible. Problem is the dear old OFT as was used to envisage all sorts of scenarios and if a clause would impact on them rule it out (he said from very bitter personal experience!!).
Think we have done this to death now Mark and I really do hope your agreement will indeed hold up should any tenant be so bold as to challenge it as I know you will have created it from the best of motives.
Mark Alexander - Founder of Property118
17:40 PM, 29th September 2014, About 10 years ago
Reply to the comment left by "Industry Observer " at "29/09/2014 - 17:24":
Not only best of motives but with the backing of Counsels opinion too 🙂
I agree we've done this to death and if a landlord uses the template and a tenant challenges it then I'm sure Mark Smith will be happy to assist the landlord if required - for a fee of course - a fiver only goes so far!
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