Any tenant surrendering a lease before the end of the contractual term will assume that this terminates all their obligations to the landlord and they can “walk away”. Often a premium is paid to the landlord in return for the early exit from the lease. However, a recent case has raised a serious pitfall where the landlord has a mortgage – the lender did not consent to the surrender and the surrender was ineffective.
The case is Co-operative Bank plc v Hayes Freehold limited (in liquidation) where a deed was completed which purported to effect a surrender of a headlease and an underlease. It also provided for the unconditional and irrevocable release of the undertenant’s guarantor. Both the freehold title and the underlease were charged to Co-operative Bank and, under the terms of the charge, the bank’s consent was required to a surrender or any other dealing with either lease. The bank had not consented to the surrenders and so its position was that the deed of surrender was void. [Read more…]