Archive for the ‘surrender’ Category

Periodic tenancy: effect of exercise of landlord’s right to increase the rent

June 7, 2013

In West Coast International (Parking) Ltd v Secretary for Justice ([2001] HKEC 442, CA) L granted T a lease for a two year fixed term. At the end of the two years, the agreement provided for the tenancy to continue from quarter to quarter until terminated by either party as provided for in the agreement. The lease gave the landlord the right to revise the rent at the end of the third year of the agreement. The landlord exercised this right. The tenant completed a reply slip indicating its willingness to pay the increased rent and to pay an additional deposit (the agreement provided for an increase in the rent but not in the amount of the deposit). Not long after, the landlord served a notice to quit. The question was whether the agreement as to the revised rent and increased deposit simply amounted to a variation of the terms of an ongoing periodic tenancy or amounted to the surrender of the lease and the grant of a new two year term that would later become a periodic tenancy.

As a matter of construction of the correspondence concerning the increase (in the context of the relevant terms of the tenancy) the Court of Appeal held that this was a variation of the terms of the existing periodic tenancy. Hence L was entitled to serve notice to quit.

Michael Lower

Specific performance of an agreement to surrender where the tenant has gone into administration

December 14, 2012

In A/Wear UK Ltd (In Administration), Re ([2012] EWHC 2050) A/W entered into an agreement to surrender with its landlord. A/W agreed to pay GBP340,000 on completion of the surrender. This sum was held in escrow by the landlord’s solicitors. Before the surrender could take place. A/W went into administration. The landlord (in effect) sought leave to bring proceedings for specific performance of the agreement to surrender. This was refused. The landlord would have to take its place alongside A/W’s other creditors.

The judge, David Donaldson QC pointed out that the effect of specific performance  would be to allow the payment of the agreed sum to the landlords. He  said:

‘The corollary of this benefit is to deprive the Company (and hence its creditors) of its future right to those monies. These considerations would make it in my judgment inappropriate for the court to grant the discretionary remedy of an order for specific performance.’ ([8])

Mesne profits following delay in giving vacant possession after surrender

October 8, 2012

In 張淑嫺v Chik Wai Yin ([2012] HKEC 1334, DC) the parties seem to have agreed on the surrender of the lease of a flat to take effect on 5 August 2010. At the meeting on the agreed date for the surrender, L claimed to be entitled to retain part of the rent deposit to cover the cost of repairs which she alleged to be the tenant’s responsibility. T only gave possession on 14 August 2010. T was ordered to pay mesne profits for the period from 5 to 14 August. The dispute as to the dilapidations / rent deposit did not affect the liability to pay mesne profits (even though T was entirely successful as regards this dispute).

Surrender by operation of law: conduct of parties inconsistent with the continuance of the tenancy

September 24, 2012

In Brent LBC v Sharma ([1992] WL 893783, CA (Eng)) a tenant served notice on her landlord to say that she had moved out and that she would not object if her co-habitee were granted a lease of the property. The landlord stopped charging rent and internal documents showed that it regarded the lease as having come to an end. Subsequently, it served a notice to quit on her at the property. The question was whether there had been surrender by operation of law and the English Court of Appeal found that there had been.

‘In my judgment, the court is entitled to look at the whole of the conduct of the landlord prior to the issue of proceedings. If, by the time of the issue of the proceedings, it is quite plain that the landlord has accepted by his conduct, or shown by his conduct, that the tenancy no longer existed, then the conditions giving rise to a surrender by operation of law are established.’    (Stuart-Smith L.J)

The tenant regarded the tenancy as being at an end from the date of her notice to the landlord. The landlord’s subsequent conduct showed that it too regarded the tenancy as being at an end. Its later notice to quit did not prejudice this conclusion; it was just a belt and braces effort by the Council.

Surrender by operation of law is based on estoppel

September 10, 2012

In Nickells v Atherstone ((1847) 10 Q.B.R. 944; 116 ER 358) A was the tenant under a three year lease. He  moved his belongings out of the property during the lease term and asked the landlord to find a new tenant. The landlord did so but the new tenant became insolvent. The landlord then brought an action against A for the rent payable after the new tenant stopped paying rent. This action failed on the basis that re-letting the property with A’s consent gave rise to a surrender by operation of law.

Denman CJ said that surrender by operation of law arises ‘where the owner of a particular estate has been party to some act the validity of which he is by law estopped from disputing, and which would not be valid, if his particular estate had continued.’ (949).

This was true in the present case;

‘As far as the plaintiff, the landlord, is concerned, he has created an estate in the new tenant which he is estopped from disputing with him, and which is inconsistent with the continuance of the defendant’s term. As far as the new tenant is concerned, the same is true. As far as the defendant, the owner of the particular estate in question, is concerned, he has been an active party in this transaction, not merely by consenting to the creation of the new relation between the landlord and the new tenant, but by giving up possession and so enabling the new tenant to enter.’ (949)

The effect of forfeiture and surrender on sub-leases and derivative interests

September 7, 2012

In Great Western Railway Company v Smith (1875 – 76) L.R. 2 Ch.D. 235, CA (Eng)) a railway company owned the land on which its line lay but not the minerals beneath. The owner of the minerals granted a lease to H. The railway company paid H not to work the minerals (for safety reasons concerned with the line). H then surrendered the lease to the landowner who began to work the minerals. The railway company sought, and obtained on appeal, a perpetual injunction restraining the working of the minerals.

The outcome depended entirely on the construction of the Railway Clauses Act 1845 but the court also addressed the question of the operation of the surrender on the rights of the railway company derived from the lessee. It held that these derivative rights were not affected by a surrender:

‘It is a rule of law that if there is a lessee, and he has created an underlease, or any other legal interest, if the lease is forfeited, then the under-lessee, or the person who claims under the lessee, loses his estate as well as the lessee himself; but if the lessee surrenders he cannot by his own voluntary act in surrendering, prejudice the estate of the under-lessee or the person who claims under him.’ (Mellish L.J. at 253)

Leases: when does a variation amount to a surrender and regrant? Personal covenants and covenants that ‘touch and concern’ the land.

January 17, 2012

A deed of variation of a lease only amounts to a surrender and re-grant where the legal estate has been altered (perhaps this can only be done by altering either the premises or the term). An assignee of the lease might agree to significant variations of the terms of the lease. In principle, the original tenant remains liable for the personal obligation in the original lease terms (but in Hong Kong section 41(8) of the Conveyancing and Property Ordinance releases assignors from liability for post-assignment breaches of covenants that fall within section 41(2)). Of course an original tenant could agree to be liable for post-assignment breaches (of the original and / or varied lease terms).

In Friends Provident Life Office v British Railways Board ((1997) 73 P & C.R. 9, CA (Eng)) L owned the reversion of a lease granted to T. T assigned to A1 who entered into a deed of variation that increased the rent and altered the user and alienation clauses. A1 assigned to A2. A2 went into liquidation. L claimed from T the rent arrears that had accrued while A2 was in possession. T argued that it had no liability under the lease at all since the changes introduced by the deed of variation had been so significant as to amount to a new lease. This failed in the Court of Appeal. A deed of variation of a lease only amounts to a surrender and re-grant where the legal estate has been altered (perhaps this can only be done by altering either the premises or the term). Here the variation was not so significant as to give rise to a change in the estate.

T was liable to pay the original rent because of its personal covenant to do so (this must be read in the light of CPO s.41(8) in Hong Kong). It was not liable to pay the increased rent since the terms of its covenant did not cover any such increase.

A tenant whose title has been extinguished by adverse possession can surrender the lease

May 26, 2011

A tenant whose title has been extinguished by adverse possession can surrender the lease and thereby give the landlord an immediate right to possession.

Fairweather v St Marylebone Property Co Ltd ([1963] AC 510, HL) concerned a shed that lay across the boundary between two properties (311 and 315 West End Lane). There were 99 year leases of both properties. The tenant of 311 took possession of the whole of the shed and defeated the title of the tenant of 315 to the latter’s portion of the shed. The tenant of 315 surrendered the lease. The freeholder of 315 then sought to recover possession of the part of the shed belonging to 315. The majority of the House of Lords held that the freeholder was entitled to do so.  The effect of the surrender was that the landlord had an immediate right to possession and did not have to wait until the lease had expired to be able to recover possession. Even though the lease had been extinguished by the UK’s equivalent of the Limitation Ordinance, this did not mean that the tenant had no estate to surrender the landlord.

Conduct required for surrender by operation of law

February 26, 2011

A lease is surrendered by operation of law when the conduct of the parties amounts to an unequivocal acceptance that the tenancy has ended.

In Bellcourt Estates Ltd v Adesina ([2005] EWCA Civ. 208, CA (Eng)) the tenant had vacated the property and stopped paying rent. The question was whether the landlord’s delay in taking any action in response to this situation amounted to an acceptance that the lease had come to an end. The English Court of Appeal decided that it did not. It suggested that the law can be stated thus:

‘The conduct of the parties must unequivocally amount to an acceptance that the tenancy has ended. There must either be relinquishment of possession and its acceptance by the landlord, or other conduct consistent only with the cesser of the tenancy, and the circumstances must be such as to render it inequitable for the tenant to dispute that the tenancy has ceased or such as to render it inequitable for the landlord to dispute that the tenancy has ceased.’ (see Woodfall para 17.020 but the Court of Appeal suggested that the final phrase should be added to the passage).

Surrender by operation of law requires unequivocal conduct by the landlord and the tenant

January 26, 2011

Surrender by operation of law requires unequivocal conduct on the part of the landlord and the tenant.

In Sanctuary Housing Association v Campbell ([1999] 1 WLR 1279, CA (Eng)) a tenant wanted to surrender her tenancy. The landlord told her that to do so she had to vacate the property and return the keys. She returned the keys but informed the landlord that she could not empty all of her belongings from the property because it was occupied by her violent husband. He had changed the locks. It was held that by complying with the landlord’s requirements as far as she was able, the tenant had brought about a surrender by operation of law. The conduct of both parties was unequivocal.