Abandoned premises: Abandon hope, all ye who seek re-entry?

Commercial and residential landlords alike have been left disappointed by the extension of the restrictions on terminating tenancies imposed by the Coronavirus Act 2020, particularly when a tenant is in arrears.

There is also now an increasing problem where tenants appear to have decided that they do not want to remain responsible for their tenancy obligations, but simply “abandon” the property without any communication to their landlord. What are the options available to landlords in such circumstances?

Initial considerations

It is not possible for tenants to “abandon” their premises and unilaterally escape liability for their tenancy obligations. Unless some form of agreement is reached with the landlord, the tenant will continue to be liable for rent until the tenancy ends. While a landlord may prefer to try to maximise its claim in this regard and avoid becoming liable for rates, it obviously needs to weigh up factors such as:

• the state of the market and whether potential new tenants are going to be hard to find; and
• the existing tenant’s financial position and whether it would be better to have the property returned, so it can be relet to a new tenant with better means to pay.

Is there a surrender?

There are no specific rules to govern abandonment of leased premises as such. Instead, this action may be better considered as the possible offer of a surrender of the lease by the tenant. However, where there is no express offer to return the premises or return the keys, the question is whether the abandonment by itself can amount to a surrender “by operation of law”.

This type of surrender usually requires an intentional unequivocal act, inconsistent with the continuation of the tenancy, from both parties. In most instances, this will usually involve the tenant handing back the keys of the property to the landlord and the landlord willingly accepting them, thus treating the tenancy as at an end.

Proving this mutual agreement will be difficult in cases of simple abandonment where the tenant fails to make contact. Although there might be apparently strong indicators of the tenant’s intention to end its lease – such as the non-payment of rent and/or the removal of possessions – the landlord may still be uncertain that the tenant has genuinely abandoned the property without an intention to return.

In many instances, a tenant will communicate its desire to end the tenancy by delivering the keys to the landlord. Where a landlord does not wish to accept a surrender, either the keys should be swiftly returned to the tenant or the landlord should write to the tenant to confirm the basis on which the keys are being held – for example, to access the premises in case of emergency – and set out clear arrangements for the collection of the keys.

However, there are scenarios where an uncommunicative tenant has fled the property without returning the keys, leaving the landlord in the invidious position of knowing all too well that the tenant might not have the inclination or the means to meet its payment obligations. This then leads to the question as to what the landlord is able to do to bring the existing tenancy to an end and relet the property.

Commercial units

Where a tenant of commercial premises cannot be contacted and owes arrears, landlords might ordinarily look to terminate the lease through forfeiture.

With this option restricted by the Coronavirus Act 2020 until after 31 December 2020 at the earliest, landlords must look for an alternative approach to end the tenancy lawfully. Any breach of the current restrictions will leave a landlord open to a potential claim for an injunction or in damages if the tenant decides that it wishes to return to the premises. Aside from those risks, the reputational damage involved in potentially having to explain the breach of the law to a judge may well be of greater concern.

There may be practical legal options, such as checking whether the tenancy is due to expire soon or for a break right that might be exercised in the near future. Alternatively, the option of forfeiture remains open for breaches other than arrears owed under the tenancy. It may therefore be worth checking for any other lease breaches by the tenant and then serving notice under section 146 of the Law of Property Act 1925 before pursuing forfeiture on that basis. For example, insolvency will often give landlords a right to forfeit and may allow re-entry of the premises fairly swiftly after service of the notice (depending on the type of insolvency and whether it is accompanied by a moratorium on such action).

Even where there is an alternative route to forfeiture, landlords of premises let for mixed residential and business purposes will need to bear in mind the decision in Pirabakaran v Patel and another [2006] EWCA Civ 685; [2006] 3 EGLR 23. In that case, it was held that a landlord of mixed-use premises who forfeited a lease through physical re-entry of the commercial part of the premises had breached section 2 of the Protection from Eviction Act 1977 (covered in more detail below).

Residential premises

With residential tenancies, it was only recently that the stay on possession proceedings – introduced to deal with the coronavirus crisis – was lifted. However, the lengthier notice periods now required to terminate assured shorthold tenancies remain, not to mention an inevitable court backlog for landlords to overcome.

Residential tenants also enjoy the additional protection of the Protection from Eviction Act 1977. This makes it a criminal offence for a landlord to deprive residential occupiers of their premises unlawfully, unless the landlord can prove its belief (with reasonable cause) that the occupier had ceased to reside in the premises. As a result of this risk, the standard course is for landlords not to re-enter residential premises unless they have clear permission from the tenant or authorisation via a court order.

Any landlord willing to take the risk of re-entering residential premises without appropriate authorisation will certainly want to ensure that it has sufficient evidence to support its belief that the premises were empty. In emergency situations the risk may be unavoidable, but the landlord should ideally be accompanied by a witness who can verify the purpose of the entry.

Parliament is apparently aware of the potential difficulties arising from abandonment in relation to assured shorthold tenancies. The Housing and Planning Act 2016 (not yet in force) contains a process for landlords in England to follow in cases where they suspect a residential property has been abandoned. This option would avoid the need for a landlord to go through the usual section 8 or 21 procedures under the Housing Act 1988.

The process would allow a landlord to relet its property without a court order if certain conditions are met and provided that it has served three warning notices (under section 59) and then a final termination notice (under section 57). Given the delays expected from the courts in dealing with the backlog of possession claims, this process could be of real help to landlords and the residential letting market generally if brought into effect as originally intended.

What are the practical options in the meantime?

While a landlord considers its position in relation to apparently abandoned premises, there are some immediate practical steps that it can take:

Attempt to contact the tenant

Hopefully, most landlords should have a current mobile number and e-mail address for their tenants. Messages sent via social media channels such as LinkedIn and Facebook may also secure the tenant’s attention and engagement.

Even if a landlord has not yet decided whether it wants to accept the return of the premises, it can be helpful to get written confirmation from the tenant of its intentions at an early stage – in case it becomes difficult to get engagement later on. If the landlord decides that it is willing to accept a surrender, it can obviously ask for the return of the keys.

If the tenant cannot be contacted, seek information from elsewhere

In some cases, the tenant might not be contactable and/or respond, and it then becomes harder for the landlord to prove that the tenant intends to abandon the premises permanently. Landlords should again carry out early enquiries, including contacting neighbouring occupiers for information (and requesting written confirmation from them where possible), undertaking online research into the tenant’s latest activities, and possibly instructing a tracing agent to ascertain information as to the tenant’s whereabouts.

If it transpires that the tenant has relocated abroad and court proceedings are going to be required to regain possession lawfully, the landlord will need to check whether the lease contains an address for service of proceedings in England and Wales together with a requirement to keep the landlord notified of any change, or other similar provisions. If these are absent, there may well be additional hurdles when it comes to serving any court proceedings required.

Once possession is regained, it is possible, or even probable, that some goods belonging to the tenant and/or third parties will have been left behind. If so, then the landlord should arrange for an inventory to be taken of the goods at the premises and consider serving this on the tenant, accompanied by a notice under the Torts (Interference with Goods) Act 1977. That notice will allow the landlord to sell or dispose of the tenant’s goods if it does not collect them within a certain period of time.

This content was first published in Estates Gazette on 13 October 2020. and was written by partner Emma Humphreys and associate Samuel Lear at Charles Russell Speechlys LL. For more information, please contact Emma on +44 (0)20 7203 5326 or at emma.humphreys@crsblaw.com or Sam on +44 (0)1242 246374 or at samuel.lear@crsblaw.com.