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Real Estate Tip of the Month: Lease Surrenders – What can slow them down and how to speed up the process

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Published 18 April 2023


The surrender of a lease should be quick and easy to complete. However, there are a number of factors which may cause delay. We have set out below some of the most common, with suggestions to overcome them.

Third Party Consent

Quite often third parties that don’t have a direct interest in the transaction cause delays if they are not kept abreast.

1. Landlord’s funder - If the landlord’s title is charged then it may be a term of the charge that consent of the funder is obtained prior to completion of any surrender. Without this, any purported surrender will likely be ineffective. The landlord should make its funder aware of the terms of any proposed surrender, seek their approval and line them up to issue the formal, signed consent quickly;

2. Tenant’s funder – Slightly less common for a rack rent occupational lease, but if the tenant’s title is subject to a charge then this will need to be discharged before completion of the surrender takes place. The tenant should obtain a redemption statement and arrange for the charge to be discharged in full on or before completion of the surrender, as well as making arrangements for the funder to complete and sign the necessary forms to confirm the discharge.

More generally, if the tenant’s assets are subject to a floating charge, a letter of non-crystallisation from any funder will be required prior to completion.

3. Superior Landlord – If the landlord’s title is leasehold, it is possible that superior landlord’s consent also needs to be sought (depending on the terms of the landlord’s lease). Again, early contact is crucial to seek the superior landlord’s approval to the terms of the surrender and to document its consent in the form prescribed in the landlord’s lease. Usually, consent must not be unreasonably withheld or delayed and so pressure can be applied accordingly.

Full Release?

It is often the case that a surrender will operate as a full release for the tenant from all obligations in the lease, past and future. As a landlord, it is therefore vital to carry out an inspection of the property as early as possible in the process to ensure, for example, that the condition of the property complies with the requirements of the lease.

If there are any outstanding liabilities that the landlord wants to survive the surrender, for example, an obligation on the tenant to make a service charge balancing payment at the end of the service charge year or balancing payments of turnover rent or outstanding arrears, then these need to be identified, agreed up front and provided for in the documentation.

Completion Statement

Another common delay comes from agreeing the apportionments and other sums which are payable by either or both parties on completion. These sums should be set out in an agreed completion statement which clearly indicates the total amount due on completion. Completion statements are often left until the last minute and can be fairly involved

Identifying and resolving these issues at an early stage in the transaction is important and good lines of communication between any party with an interest in the transaction should ensure matters are not overly protracted.