Land and Property: Property rental business: surrender of a lease
In a surrender, the tenant surrenders his lease to the landlord and the lease is brought to an end. Thus the asset used by the seller no longer exists and will not used by the purchaser (i.e. the landlord) in carrying on the business. The property rental business carried on by the lessee has ceased and cannot be transferred as a going concern, even if the sub-tenants remain in occupation. The right to receive rental income derives not from the transfer of the lease but from the landlord’s rights as freeholder. The surrender of a lease is therefore not covered by the TOGC provisions.
In certain circumstances, particularly in relation to Scottish land law, the original lease will not be extinguished on surrender. It is our policy however, to see the continuation as merely an enabling document which returns the property to the landlord but, as it does not affect the landlord’s right to collect rent, it is not used to carry on the same kind of business.