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As a commercial tenant, a situation may arise when you wish to surrender your lease. For example, when running a company, there are times when business may not be progressing as you wish. This may mean that your current business commitments become either too great to bear or unnecessary. Specifically, you may find you can no longer commit to your commercial lease for your premises or simply do not need it anymore. Where this occurs, you may wish to surrender your lease. There is a process for surrendering a lease that you should be aware of as a commercial tenant. This article will explain some critical points about surrendering a commercial lease in the UK.
What is a Surrender of a Lease?
A surrender of a commercial lease is where you, as the commercial tenant, surrender your lease to your landlord. Therefore, you no longer have a legal interest in the land and instead give it to your landlord, who takes it, and the lease ends.
The effect of a lease surrender means that your landlord regains possession of the land, and you are no longer liable for the further rent of the property.
A lease surrender means you must give your landlord, for example:
- all title documents;
- keys to the building; and
- security passes, passwords and codes.
However, your landlord does not have to agree to your wish to surrender the lease. Generally, a landlord will agree if they want to gain possession of the property. For example, if the landlord has another tenant ready to occupy the commercial space. Alternatively, they may require you to pay a premium for them to agree to the surrender.
How to Surrender a Lease
As a commercial tenant, you may expressly surrender a lease. This requires you to do so through a deed. It does not matter how long you have been in occupation under the tenancy.
A surrender of a lease can also occur as an operation by law. This means there is no express surrender. Rather, there is a surrender of the lease due to action by you or your landlord, which either:
- suggests that you are aware the tenancy has come to an end, or
- means that it is not in line with the continuation of your tenancy.
A lease surrender by an operation of law must be certain. This means that it is a surrender without any element of doubt. For example, if you leave the property and give your landlord back their keys, your landlord must clearly demonstrate that they view and accept this as a surrender. If they do not, this does not satisfy the lease surrender requirement.
Surrender by Agreement
Where your lease is a protected tenancy, an agreement is only lawful if you both follow the legal notice procedure for this, which must specify either the:
- circumstances when a surrender will occur; or
- the date.
A legal agreement in these circumstances must either follow an Advance Notice or a Statutory Declaration Procedure.
1. Advance Notice Procedure
If your landlord uses this procedure to surrender the lease, it encourages you to consider the effect of surrendering your lease. It does this by providing 14 days to think about your decision to surrender and reminding you that you will lose your renewal rights.
2. Statutory Declaration Procedure
You may use this procedure to surrender a lease as a commercial tenant when you urgently need to surrender a lease before the 14 days described above.
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Points to Note When Surrendering a Lease
You may not need to surrender a lease where your lease agreement has a break option clause, as this may allow you to end the lease early. However, you should get legal assistance regarding this.
Instead, you should be aware of some points relating to surrendering a commercial lease. For example, if you wish to surrender your lease, your commercial landlord may request to carry out general pre-surrender checks with you, such as those regarding the following:
- Land Registry’s identity document confirmations;
- any underlease documents;
- a land charges search;
- local authority queries; or
- Companies House searches such as those about insolvency.
Key Takeaways
If you find yourself in a position where you no longer need or can no longer afford your commercial lease, you may surrender the lease as long as your landlord agrees with your request. You can immediately surrender with a deed, or you may surrender as an operation by law. However, the latter must be completely evident as you and your landlord intended. If you wish to surrender later, you can do this through an agreement to surrender, which requires you to complete the correct statutory processes where you have a protected tenancy. There are many points to be aware of concerning the surrender of a lease, such as that your landlord does not have to agree to it and that surrender of a lease may not be necessary if you have a break option clause in your lease agreement.
If you need help understanding the surrender of a commercial lease in the UK, our 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 for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A surrender of a lease is where you, as a commercial tenant, choose to give up your commercial lease, and your landlord agrees to this. This means your landlord will regain occupation of your premises, and you will longer be liable for future rent.
You can surrender a lease with immediate effect or through an operation of law. You can also agree to surrender a lease in the future through a surrender agreement. However, your landlord must agree to the surrender.
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