In 2013 Friends First claimed for almost €190,000 in rent and other lease payments from a tenant who had a lease of a floor of Duke House. Friends First acquired Duke House in 2007. In dismissing the claim, the High Court in Friends First Managed Pension Funds Limited v Paul Smithwick held that the tenant surrendered his lease by conduct which was encouraged, endorsed and accepted by the landlord at the time.
With nearly 20 years left to run on his lease, the tenant vacated the premises but continued paying rent for a year until November 2004. Friends First’s predecessor in title – the old landlord – initiated or encouraged the occupation of the premises by a third party known to him. The tenant expressed a wish that should such third party take possession that payment of rent would be a matter between the landlord at the time and such third party. A short term letting agreement was entered into between the tenant and the third party which included an option for the third party to take an assignment of the original lease. The option was not exercised and another party known to the old landlord took occupation, with the full co-operation of the old landlord who accepted rent from this other party.
Why did these actions lead the Court to determine the lease had been surrendered?
Even though it was not what the parties thought they had achieved by their acts (the tenant initially claimed the lease had been assigned), the Court held that the important point is the Court’s construction of the parties’ acts.
The Court accepted that there was a mutually understood arrangement between the tenant and the old landlord such that the tenant would vacate the premises and that he would be replaced by a person known to the old landlord. It found that this involved the tenant adopting “a position inconsistent with his position as tenant i.e. he vacated the premises and ceased paying rent in November 2004 and he did this at the request of, or at the very least, with the sanction of the plaintiff’s predecessor in title.” The Court found the tenant surrendered his lease by conduct which was encouraged, endorsed and accepted by the old landlord.
Landlords faced with a commercial tenant vacating before lease termination should take great care to ensure that their actions are not regarded as so inconsistent with the continued existence of the lease that they indicate acceptance of surrender of the lease by the landlord.
Contributed by Tara Rush
