CG71230 - Leases: Disposal: Surrender of a lease: Introduction

A lease is said to be ‘surrendered’ when it is disposed of to the holder of the immediately superior interest in the property. For example, if the freeholder has granted a lease of a property, and the holder of that lease has granted a sub-lease:

• the holder of the original lease could surrender it to the freeholder, or
• the holder of the sub-lease could surrender it to the holder of the original lease

However, if the holder of the sub-lease disposed of it to the freeholder, that would be an assignment rather than a surrender.

The surrender of a lease involves both the disposal of that lease by the tenant and the acquisition of it by the landlord. This is the case even though when a lease is surrendered, it normally merges with the superior interest and ceases to exist.

The general rules which apply to disposals of leases, see CG71100P, apply equally to surrenders. In particular, if the surrender is between connected persons, see CG14560 onwards, or is not at arms length, the disposal and acquisition will be deemed to have taken place at market value, see CG14530 onwards.

However, certain special rules apply to surrenders:

• extensions of leases: ESC/D39, see CG71240
• consideration for surrender of lease: release from certain obligations, see CG71260
• sum paid by landlord to procure surrender of lease, see CG71262
• sum paid by tenant to effect surrender of lease, see CG71262
• sum received by landlord for accepting surrender of lease, see CG71262.