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As a commercial tenant, you may no longer wish to have the existing lease for its fixed term. In this case, you can surrender your lease to the landlord or assign the original lease to another party. However, it is crucial to understand the differences between the surrender of a lease agreement and a lease assignment. This article will highlight some key differences between a lease surrender and a lease assignment in the UK.
This cheat sheet outlines what you should be aware of in your lease agreement.
What is a Lease Surrender?
A lease surrender is when a tenant surrenders their lease to their landlord. Typically, both parties agree to this. The landlord has the tenant’s estate, and the lease term ends. Furthermore, the tenant no longer has any obligations under the lease.
When tenants surrender their lease to their landlord, they can do so expressly or through an operation of law. Where a tenant surrenders their lease expressly, it must be effected by deed. Otherwise, it is not a valid lease surrender.
A lease surrender through the operation of law is not expressed but is something the two parties infer from one another. Therefore, the actions they take either:
- show that they both agree the tenancy has come to an end; or
- are actions that do not comply with the tenancy.
What is a Lease Assignment?
A lease assignment is where the assignor (the tenant), transfers their right to the lease to another party (the assignee). In this case, the lease still exists.
When a tenant assigns the lease, they are usually required to have the landlord’s consent. Where an assignor transfers their rights to the lease to another person, they can do so either by:
- legal assignment;
- assignment by operation of law; or
- equitable assignment.
A lease assignment by legal assignment is where the assignment is by specific legal procedures in property law, which your solicitor will know.
Assignment of a lease by operation of law is where the lease is assigned due to a law already in place. For example, where a lease assigns because of a death or bankruptcy.
When a lease assigns through equitable assignment, it does not follow the procedures of a legal assignment. Still, it meets the criteria of an equitable assignment which is beyond the scope of this article.
Once an assignee has the right to the lease, they have all the rights the assigner had in the lease but will not have any new ones.
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What Are the Differences Between the Two?
| Lease Surrender | Lease Assignment |
| The lease between the landlord and tenant no longer exists. | The lease continues to exist. |
| As the lease no longer exists, the landlord can create new rights. | As the lease continues to exit, the rights remain the same. |
| There are tax consequences for a lease surrender. | There are tax consequences for a lease assignment. Still, these are different from those of a surrender. |
| A tenant can surrender their lease expressly or by operation of law. | You can assign a lease through legal assignment, equitable assignment or operation by law. |
| Operation by law means you surrender the lease through the implied conduct of both the landlord and the tenant. | Operation by law means that the lease is signed by meeting express legal criteria. |
Key Takeaways
It is possible for a commercial tenant to either surrender their lease to their landlord or assign it to another party. When tenants surrender their lease, they give their interest in the land back to the landlord. However, when tenants assign their lease, they pass it to another party with the landlord’s permission. Although both acts mean that the person is no longer a party to the lease, the two have key differences.
If you need help understanding the difference between a lease surrender and a lease assignment in the UK, LegalVision’s experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page
Frequently Asked Questions
A lease surrender is when a tenant returns their lease to the landlord, so they no longer have an interest in the land. This means the lease term comes to an end.
A lease assignment is where a tenant gives their lease to another party, but the lease does not end.
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