Tenancy Surrender & Mitigating Loss

What if your tenant decides to surrender the tenancy midway and refuses to pay rent? As a landlord do you have the right to insist that the tenant pays the rent for the entire period he or she signed up for? According to law the landlord has a right to insist on the payment being made, and there are precedents like one of the earliest ones - the case of British Westinghouse Electric Company versus the Underground Electric Railway Company in 1912.

However, it is left to the discretion of the landlord to let the tenant go scot free and re-let the property to make up for the losses caused by the erring tenant. The other alternative is to refuse to accept the surrender and take the tenant to court, though the outcome could take quite a while, and there is no guarantee that the losses can be made up at the end.

There have been cases like the one involving Reichman (landlord) versus Beveridge & Gauntlet (a firm of solicitors). Although it was a 5-year lease, the tenants broke the contract in 3 years and vacated the premises. The tenant’s contention was that the landlord failed to re-let the premises and also refused an out of court settlement for a negotiated amount. The judge, however, ruled that the landlord did not have any obligation to mitigate the losses, though the defendants went on further appeal.

The case went to the Court of Appeal, which had to rule whether the landlord’s claim was unreasonable as far as continuing the tenancy was concerned. This is one reason why landlords need to think twice before accepting surrender when the contract is being broken well before the contract period ends. Landlords normally insist that the tenants themselves find a suitable replacement before vacating the premises, so that the losses are mitigated. However, the landlord has the right to demand rent for the entire lease period or until a suitable replacement is found, whichever is earlier.

The above case was for commercial premises, and the same yardstick may not be applied for a residential property and cannot be taken as a suitable precedent. Of course, it is the prerogative of judge to consider tenants to be consumers who need to be given due protection. If the remaining lease period is rather lengthy, it is up to the landlord to consider the case and act accordingly by accepting the surrender graciously.