What can a landlord do where a tenant of commercial property vacates the property and returns the keys?
The difficulty in such cases is that often the tenant is no longer able to pay the rent or is facing bankruptcy/ examinership/ receivership/ liquidation. In such cases the legal remedies available to a landlord are often unsatisfactory from an economic point of view given the financial position of the tenant. However in those cases where a tenant has continued to carry on business or it is still economically viable to pursue the tenant (or any guarantors of that tenants obligations under the lease) for any arrears of rent then in such circumstances it is important that the landlord does not do anything which will prejudice the right of the landlord to claim for continuing rent against that tenant.
In this regard the landlord should avoid doing any act which might be held or construed to be a surrender of the lease. Once the lease is surrendered then the landlord will be unable to claim rent from that point on. The re-letting of the property is a surrender of the old lease on the part of the landlord.
In deciding whether a surrender has occurred the courts look at whether the acts of the landlord are inconsistent with the continuation of the lease. If so then the lease will be deemed to be at an end. Acts which have been held by Courts in other jurisdictions as not amounting to a surrender include:-
(i) Advertising the property to rent.
(ii) Carrying out necessary repairs to the property.
(iii) Installing a caretaker in the property to take care of it.
(iv) Possibly maintaining a garden of the property.
(v) Possibly maintaining insurance cover on the property.
(vi) Securing the property.
(vii) Possibly in certain circumstances carrying on the business previously carried on by the tenant at the property e.g. the running of a hotel so as to avoid forfeiture of a liquor licence.
It is important that a landlord should avoid the following:-
(i) Occupying or using any part of the property or allowing another party to do so other than to maintain and secure the property.
(ii) Painting out the tenants trading name or other information from the front of the property.
(iii) Avoid carrying out any significant works to the property going beyond mere maintenance so as to imply that the landlord has taken back possession.
In summary therefore a landlord faced with a vacant property under an unexpired lease will not prejudice their position against the tenant by attempting to re-let the property, maintaining and securing it or carrying out any urgent necessary repairs. However any further actions in relation to the property under the part of the landlord may lead to a finding that the lease has been surrendered.
For further information please contact Shane Keane by phone: (01) 6794165 or email: email@example.com