When letting or renting a property, circumstances may arise where a tenancy needs to end sooner than initially intended or agreed. While one option is for the terminating party to serve notice on the other, there is another way to end the agreements while serving both parties’ interests. Enter Deed of Surrender.
Here we explain a deed of surrender, when a landlord should use one, how it works, and what happens after its execution. These types of documents and agreements can be important, especially in the context of any dispute between a landlord and tenant. A deed of surrender will often work together with another essential document: a deed of settlement and release.
If you are in a dispute with a tenant, our experienced property litigation team would love to help resolve your situation. We have significant strength in depth and continue to act in numerous disputes of this nature and type across the country. Contact a member of our property litigation team at Helix Law, and we will be happy to assist you.
So, What Is a Deed of Surrender?
A deed of surrender is a legal document signed by a landlord and tenant who both agree to terminate a tenancy early. This document cannot be ‘served’ and is not a notice; it is a contract which records an agreement to end a right in relation to land. If there is no agreement, there can be no deed of surrender.
Parties often use a deed of surrender when their situation changes and the landlord needs to regain possession of the property or where there is an agreement that the tenant can vacate and leave the property before the end of the agreed term.
When Should a Landlord Use a Deed of Surrender?
There are many reasons why a landlord might want to use this document:
- They may wish to sell and market the property without a tenant in situ. The tenant may be subject to a fixed-term contract, so the landlord might negotiate terms to compensate them for the remaining term if they leave.
- The landlord might intend to redevelop the property, requiring it to be vacant.
- The tenant could ask to leave early due to an unexpected change in circumstances, such as job loss or financial hardship. If the landlord agrees, the parties can use this document to end the tenancy.
- The parties could mutually agree to end the tenancy, for example, if their relationship has deteriorated or the tenant has failed to keep the property in good condition.
- It can effectively resolve a potential court dispute if the tenant breaches the lease terms.
How Does a Deed of Surrender Work?
Usually, one party approaches the other informally about an early termination. If the other party agrees in principle, the finer details, including the date the tenancy will end, each person’s obligations, and any compensation, will need to be confirmed.
You might ask, ‘Do we really need this?’. Our experience as litigators is that disputes arise out of uncertainty, misunderstanding, or perhaps more cynically deliberate attempts to engineer certain risks coming into reality.
Imagine a situation where a tenant calls you as the landlord, confirming a relationship breakdown and requesting your agreement to end the tenancy early. You’re considering selling or completing work, and it’s actually quite convenient, so you agree. In all the turmoil, the tenant asks if they can leave some items at the property after X date (the agreed end date), and you confirm that’s fine.
When the specified date arrives, you attend the property, take possession, change the locks, and then start your remedial works. Then, out of the blue, you receive a letter from legal aid-funded solicitors acting on behalf of the tenant alleging you have unlawfully evicted them, leaving them homeless, and confirming they are seeking an injunction against you as well as claiming punitive damages and legal costs amounting to thousands of pounds.
In the above scenario, there’s a lack of evidence supporting your position. There is no formal agreement and considerable risk. Even if you (as landlord) have sent some emails or text messages, you’re facing a significant claim, and you will incur costs in defending your position. Even if you win, the tenant is entitled to legal aid, so you won’t recover any of your expenses. You’re in a lose-lose situation.
We deal with situations similar to the above on behalf of landlords regularly.
If there were a deed of surrender (and/or a deed of settlement and release if there is any dispute), you’re securing certainty that would later prevent a tenant from raising complaints in this way. Legal aid funding would not be available to them, and a spurious, vexatious claim would face far higher prospects of being successfully resolved sooner and more cheaply.
In practical terms, each party to a deed of surrender must agree to the terms of the surrender, which can be considered a type of contract (even though that isn’t technically correct). Reaching a concluded point where the content is agreed upon might take a little negotiation and some back-and-forth.
The content of a deed of surrender will vary depending on the property and situation, but as a bare minimum, there will be terms and conditions, and to satisfy the required formalities, the document must state it is a deed, and the parties must sign it before a witness, who must also sign it.
While electronic signatures are generally accepted, signing in ink is best practice. The document must also be “delivered”, which means the parties acknowledge through words or conduct their intention to be bound by its terms. It must also be dated.
We recommend that the parties meet at the property on the date of the surrender, check that the property is empty, receive the keys from the tenant, and sign the Deed of Surrender at the property at that time.
This obviously applies most readily to residential property, but precisely the same points above apply to commercial property and the termination of a commercial lease.
What Obligations Must the Tenant Fulfil Under the Existing Lease?
A deed of surrender ends the lease. After a deed has been entered into, the lease no longer exists from that point forward. There are no rights or obligations in respect of the property moving forward.
Unless expressly stated- and we would expect to see this in a deed of settlement and release, not a deed of surrender, a deed will not automatically end the tenant’s obligations under the lease that have already accrued.
So if, for example, there are rent or service charge arrears up to the point and date of the deed of surrender, unless explicitly stated otherwise, the tenant will remain responsible for paying those sums up to that date.
Care and caution are needed to ensure there is no doubt or uncertainty. The property’s condition also needs to be considered, which is why the tenant should have vacated before a deed of surrender is signed.
The Deed of Surrender will terminate the tenancy, so the tenant will not be obligated to pay rent and service charges that accrue after the date of surrender. The landlord will also be responsible for all outgoings related to the property after the date of surrender—council tax and utilities if it is a residential property and business rates and utilities if it is a commercial property.
The lease may specify additional responsibilities, so both parties should check it carefully to ensure they meet all obligations before and after entering into the (any) surrender agreement.
What Happens Once the Deed of Surrender Has Been Signed?
Once the parties sign the agreement, the tenancy will end. The tenant will have moved out or vacated and returned the keys to the landlord, leaving the property in the condition determined in the tenancy agreement.
Any outstanding payment must be settled within the stated timeframe, and the landlord should return any deposit to the tenant accordingly. Other housekeeping matters, such as utility transfers, should also be finalised.
After the parties deal with the above, they no longer owe each other any obligations or responsibilities under the existing lease.
Navigating the nuances surrounding surrender can be fraught. We have litigated disputes where the parties entered into a deed of surrender too early before vacant possession was provided. The tenants’ situation has then changed, and they have not vacated.
The position of the landlord and tenant is then complicated legally and factually, creating complexity and risk regarding the landlord’s options to obtain vacant possession. The tenant was not a trespasser because they were permitted to occupy after the surrender for a short period. Still, of course, none of the various landlord and tenant legislation requirements were complied with in the context of residential property. Removal was (and is) complex.
It highlights the importance of having awareness and dealing with any surrender robustly.
Frequently Asked Questions
Who Drafts a Deed of Surrender?
Either party can draft the deed, but we tend to draft these on behalf of a landlord so that they have control over the content. In both cases, the relevant person should engage a solicitor to prepare it for them—often, a tenant may not do so even though it is suggested and sensible.
Who Can Witness a Deed of Surrender?
A witness must be over 18 and independent, meaning they cannot be a party to the agreement, a relative, partner, or someone who lives at the same address as the person signing. The witness must also not be someone who may benefit from the deed.
Final Thoughts
A deed of surrender is a helpful legal instrument for landlords and tenants who wish to terminate a tenancy before the end of an agreed-upon term. It is often appropriate to use a deed of surrender in tandem with a deed of settlement and release. Together, they provide a structured and mutually agreeable method to end the lease, ensuring all parties understand their responsibilities and obligations.
Whether driven by a landlord’s desire to sell, the resolution of a dispute or a tenant’s unexpected change in circumstances, the document can offer a practical solution benefitting both sides. It’s crucial that landlords and tenants fully understand the document’s implications and formalities to move forward with certainty and avoid any future disputes.
If you’re involved in a situation where you think a deed of surrender might be appropriate, where you need one drafted or think you might in the context of a dispute, contact our expert property litigation team at Helix Law. Our experienced property litigation solicitors are involved in disputes across the country and are using these documents and others to resolve problems like yours. We’d love to assist you.