Artworld Financial Corporation v Safaryan and Others: CA 27 Feb 2009

The parties disputed whether the landlord had accepted the surrender of a lease. The tenant had handed in the keys. The landlord claimed rent for the subsequent period. The court had found surrender by operation of law, the landlord taking several steps after the keys had been handed in to make the property suitable for reletting, and in fact occupying it.
Held: The landlord’s appeal failed. The judge had correctly identified the applicable law, and applied it to the facts. The court approved the judge’s description of the test which was to be applied. If there is an unequivocal offering and taking of possession, then it will be inequitable (without more) for one party to deny that the tenancy has ended by surrender In this case the landlord had gone beyond protecting his own interests in the property and occupied it.
Jacob LJ said: ‘It was common ground that the legal test for surrender by operation of law, is essentially accurately set out in Woodfall’s Law of Landlord and Tenant. I am reading from an edition which appears to have a date of January 2007. Paragraph 17.018 says: ‘There is legal distinction between a surrender by operation of law and an implied surrender. The terms surrender by operation of law ‘is applied to cases where the owner of a particular estate has been a party to some act the validity of which he is afterwards estopped from disputing, and which would not be valid if his particular estate had continued to exist . .
There the law treats the doing of such act as constituting a surrender. This principle does not depend on the actual intention of the parties but on estoppel. A surrender by operation of law does not depend on the intention of the parties; it takes place independently and, even in spite of intention, the foundation of the doctrine is estoppel.
Most critically for present purposes is paragraph 17.020, headed ‘Act must be unequivocal’: ‘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 landlord or the tenant to dispute that the tenancy has ceased.”
Dyson LJ adopted the following from the judgment by Hazel Marshall QC at first instance: ‘(1) The issue of whether there has been a surrender by operation of law after a tenant’s abandonment of the leased premises must be determined by evaluating the effect of the landlord’s conduct as a whole (cf. London Borough of Brent v Sharma (1992) 25 HLR 257 at 259). I accept Mr Kremen’s argument that the totality of such acts can amount to a resumption of possession even though individual acts might each be only equivocal. With this in mind-
(2) The test is whether the landlord’s conduct is ‘so’ inconsistent (Oastler v Henderson 1877 2 QBD 575 at 577) with the continuation of the tenant’s lease that it could only be justified as being lawful on the basis that the landlord has accepted the tenant’s implied offer to give back possession, and has taken possession of the premises beneficially for himself.
(3) Accepting back the keys without more will always be equivocal. As a matter of practicality and common sense, one party has to hold the keys to prevent an absurd situation in which they are passed back and forth because neither party wants to risk it being suggested that it has made an admission by holding them.
(4) Any act of the landlord which is consistent with its rights under the lease, such as entering the premises to inspect or to repair them, will not in itself give rise to a surrender because, by definition, it is not inconsistent with the lease continuing.
(5) Any further act of the landlord which amounts to protecting or preserving the property, such as taking security measures or doing necessary repairs, will not in itself give rise to a surrender because such self-help, necessary to preserve the landlord’s interest in the value of his property, is a reasonable response to the tenant’s evinced intention not to perform the obligations of the tenancy: cf. McDougall’s Catering Foods Ltd v BSE Trading Ltd 1998 P and CR 312; Relvok Properties Ltd v Dixon (1972) 25 P and CR 1, at p 7.
(6) Similarly, any act of the landlord which amounts to the landlord’s performing the tenant’s covenants under the lease, such as keeping the garden tidy, would not necessarily amount to a resumption of possession as it is not inconsistent with holding the defaulting tenant to performing the lease.
(7) Any further act of the landlord referable to the landlord’s seeking to re-let the premises will not necessarily give rise to a surrender by operation of law, as it is no more than what the landlord might reasonably be expected to do in the circumstance for the potential benefit of all parties: Oastler v Henderson (above). The landlord must be entitled to seek to mitigate the damage caused in reality (even if not yet technically in law so long as the lease remains extant) by the tenant’s abandoning the lease, by seeking to obtain another tenant, without thereby losing his rights against the original tenant if he is unable to do so.
(8) However, if the landlord goes further and uses the premises for his own benefit beyond the totally trivial-and certainly, in my judgment, if such use amounts to occupation of the premises-then he re-takes possession of the premises inconsistently with the continuance of the lease. This will give rise to a surrender by operation of law, since it is only on the basis of having accepted such a surrender that the landlord’s acts would be lawful.’
Sedley LJ, Dyson LJ, Jacob LJ
[2009] EWCA Civ 303, [2009] 23 EG 94
Bailii
England and Wales
Citing:
CitedOastler v Henderson 1877
The tenancy was for seven years. Shortly after its creation, the tenant left the keys with the agent and asked him to dispose of it or make the best bargain for surrender he could, and left for America. A tenant not being found, the agent returned . .
CitedBellcourt Estates Ltd v Adesina CA 18-Feb-2005
The landlord sought to recover arrears of rent. The tenant said that she had surrendered the lease of the properties. The judge had held that she ceased to occupy the premises from November 2000, after which the landlord did not send a demand for . .
CitedRelvok Properties Ltd v Dixon CA 1972
A lease was assigned to a Mr Krokidis who then departed. The landlords instructed Estate Agents to change the locks. The defendants said that that amounted to a surrender of the lease.
Held: They were wrong: ‘In my judgment Judge Irving . .
CitedMcDougalls Catering Foods Limited v BSE Trading Limited CA 2-May-1997
The appellant had guaranteed the tenant’s obligations under an underlease. The tenant having become insolvent, the landlord sought to enforce the guarantee. The appellant said that the landlord had accepted a surrender of the underlease. The . .
CitedProudreed Ltd v Microgen Holdings Plc CA 17-Jul-1995
The handing back of keys without more does not of itself constitute a lease surrender. The passage in Tarjoumi as to implied surrender would have been more correct if there was added the phrase: ‘or such as to render it inequitable for the landlord . .
CitedLondon Borough of Brent v Sharma and Vyas CA 1992
A tenancy of a flat was granted to Miss Vyas. She occupied it with Mr Sharma. They later married. She moved out and was given the tenancy of a council house elsewhere. She then wrote to Brent, the landlords, to say she was no longer sharing with Mr . .

Cited by:
CitedQFS Scaffolding Ltd v Sable and Another CA 17-Jun-2010
qfs_sableCA2010
The parties disputed whether a lease from S to LDC had been surrendered. S and QFS were negotiating for a renewal lease. No new lease having been agreed the parties agreed to a monthly sum to be paid pending agreement. L then let to a third party . .
CitedPadwick Properties Ltd v Punj Lloyd Ltd ChD 9-Mar-2016
The tenant had left the property, their solicitors writing informing the landlord that it had vacated the Property and asserting that ‘the security and safety of the Property will revert to your client.’ The keys were returned, and on the insolvency . .

These lists may be incomplete.
Updated: 14 February 2021; Ref: scu.341235