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As a tenant in a commercial lease, you occupy a property for business purposes and pay rent to your landlord per your lease agreement. The lease agreement outlines all the terms and conditions, including the lease duration. While the lease has a fixed term, you might want to end it early due to financial difficulties. One method to end your lease is to formally surrender it, either through a deed or by operation of law. This article explains the process of surrendering a lease by operation of law.
Lease Surrender
When you surrender your lease, you transfer your interest in your landlord’s property back to them. Therefore, the lease ends before its term ends. Both you and your landlord must agree to surrender the commercial lease. When you end a lease this way, the lease no longer exists.
There are two ways to surrender a lease:
- through a deed (express surrender); or
- through ‘operation by law’ (implied surrender).
Surrender by Operation of Law
Surrendering a commercial lease through operation by law differs from surrender by deed because it does not involve an explicit written agreement. Instead, either you or your landlord must imply the surrender of the lease. This requires an explicit action that shows both you and your landlord agree that the lease is no longer valid.
Actions to Surrender
There are several instances where you can surrender your lease by operation of law. In each case, both you and your landlord must agree to surrender the lease. A surrender of the lease by operation of law includes:
- you, as the commercial tenant, move out of the business premises without honouring the lease terms, and your landlord accepts this instead of taking action for breach of the lease;
- your commercial landlord creates a new lease for the property with another tenant before your lease expires. If this happens, instead of disputing it, you accept it and begin the process of moving out;
- if either you or your landlord completes an invalid notice, both parties might treat it as valid and act upon it rather than disregarding it;
- you and your landlord begin a new commercial lease agreement without formally terminating the existing one as you should, meaning you surrender it by law;
- you and your commercial landlord agree to a variation on the lease, such as extending the term of your lease. In doing so, it means it cannot take place through the current lease, deeming it surrendered by law;
- you ask your landlord to lend the premises to another party but not through a method the lease allows, such as assignment, and your landlord agrees to this; or
- your landlord decides to occupy the business premises but does not lawfully terminate the lease to do so, such as through a Section 25 Notice.
An Example
Imagine you return the keys to your commercial premises to your landlord because you realise you cannot afford future rent anymore. Not paying your rent usually violates your lease obligations. If your landlord accepts the keys without starting a dispute, they will be acknowledging your surrender to the lease.
For the action to qualify as surrendering a lease by operation of law, your landlord must acknowledge or react to your action. Therefore, if your landlord changes the locks after you leave, this does not explicitly indicate acceptance but is instead a reasonable step to secure the property without tenants present.
This cheat sheet outlines what you should be aware of in your lease agreement.
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Key Takeaways
You can terminate your commercial lease before it reaches its end term by surrendering the lease. You can accomplish this through either surrender by deed or an implied surrender by operation of law. When surrendering a lease by operation of law, the actions you or your landlord take must contradict the terms of the lease.
However, it is not sufficient for the actions to merely contradict the lease; otherwise, it would constitute a breach of the lease. Instead, the other party must accept these actions for the lease to be surrendered. Therefore, if you return your keys to your landlord because you are no longer occupying the commercial premises and your landlord does not accept this, there has been no surrender of the lease by law.
If you want to end your commercial lease through surrender by operation of law, 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.
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