Artworld Financial Corp v Safaryan [2009]

The entirety of the landlord’s conduct should be considered when deciding whether they have accepted a surrender. It is their conduct rather than their words that are relevant.

The tenants took a three year tenancy of a house in September 2004, the £390, 000 annual rent being commensurate with the luxury nature of the property. This was payable by instalments, three-monthly in advance. During the tenancy, there were technical troubles with the property. The tenants said that the central heating and swimming pool did not work property, and that despite their complaints to the landlord, a trust company named Artworld, these problems were not fixed as they should have been under the lease. The tenants contended that the landlord’s failure to remedy the defects was so serious that they were entitled to treat the lease as repudiated (terminated).

In May 2006 the tenants left the property, returning the last of the keys by the end of May. The landlords then claimed the rent for the remainder of the term plus interest, a sum totalling £487, 5000.
However, rather than relying on repudiation and claiming that the landlord’s failure to remedy the repairs allowed them to terminate the lease, as they had been contending before, the tenants argued that the landlord had acted in such a way that they it could be taken to have accepted a surrender of the lease.
Correspondence from the landlord and their solicitors showed that they regarded the tenancy to be continuing and did not intend to accept a surrender, but the tenants relied on the fact that the landlord had done no work to redecorate or improve the property, had removed certain property and had moved some of their furniture in and that members of the beneficiary family had stayed there.

HELD: The County Court found the following facts to have been established:
-    the landlord’s acceptance of the keys to the property
-    the landlord’s instructing and obtaining the ‘checkout report’ and inventory,
-    the carrying out of works of redecoration to the property to the taste of the landlods,
-    the re-hanging of certain curtains removed from the property at the tenants’ request,
-    the return to the property of some furniture which had been taken away to storage because the tenants did not want it,
-    the use of the drive of the property for parking the trust family’s cars on on several ocasions, and that
-    the landlord and members of their family had stayed in the property
The court held that a surrender of a lease by operation of law occurs if a landlord acts in a way that is clearly inconsistent with the tenancy continuing. The landlord’s intention is mainly irrelevant; it is his conduct that is taken into account.
The court accepted that if a tenant vacates the property before the tenancy has been terminated, the landlord can take actions to protect his interests which do not amount to a surrender, such as accepting the keys and entering to undertake repairs or even seeking to relet the property. However, if the landlord occupies the property or uses it for his own benefit, this is likely to amount to a surrender as it will be regarded as the landlord taking back possession. The entirety of the landlord’s conduct must be considered, in order to determine whether his conduct is inconsistent with the tenancy still existing.

The Court of Appeal agreed with the trial judge that the landlord had accepted the tenants’ surrender. Their conduct had been inconsistent with the tenants still having any right to occupy the property. The burden of proof fell on the tenants to show that the landlord’s acceptance of their surrender was unequivocal, but in this case the tenants had done this.

Landlords should be careful about accepting keys back or taking any inconsistent action if they want to avoid any argument that they have accepted a surrender. Just stating that they have not accepted a surender is not enough; it is conduct rather than words that is indicative.

Citation: Artworld Financial Corp v Safaryan [2009] EWCA Civ 303