Community Hospitals and Estates webinar
DAC Beachcroft Associate, Stan Campbell discusses Community Hospitals and Estates in this webinar from the Health Real Estate team
Published 8 August 2016
The common law principle of surrender by operation of law allows a landlord and tenant to bring a lease to an end by actions which are consistent with that intention (e.g. the return and acceptance of the keys to the premises). However, this principle represents a risk to the uninformed landlord that it may unintentionally take a surrender of a lease and release the tenant from its contractual obligations.
The risk was highlighted in the recent case of Padwick Properties Ltd v Punj Lloyd Ltd in which the tenant claimed that the landlord had accepted a surrender of its lease, and thereby released the tenant from its obligations, when its agent accepted the return of the keys on the landlord's behalf.
However, the agent was clear that in taking the keys he did so only for security and not in order to retake possession. As such, the Court applied the principle from Oastler v Henderson that "the conduct of the parties must be inconsistent with the continuation of the lease" and found that the lease had not been surrendered.
Case law permits a landlord to secure premises and even advertise them without triggering surrender. However, if the landlord wishes to preserve its contractual rights against its tenant it should take care not to take that extra step which is inconsistent with the continuation of the lease.