When does a liability for dilapidations arise on surrender?

A recent High Court decision has found that liability for reinstatement of the premises was released by terms of a Deed of Surrender, which limited the liability to breaches that occurred before the date of surrender, thus releasing the parties from their obligations and from all liability arising on or after the date of surrender. The case represents an expensive reminder of the need for landlords to take care when drafting provisions for surrender.

The landlord leased premises to the tenant under four separate leases, each for a term expiring on 30 March 2014. Under the leases the tenant covenanted to keep the premises in good and substantial repair and condition. The tenant was further granted two licences to make alterations to the premises demised on terms that, before the expiration of the lease, the tenant would carry out the necessary reinstatement works.

In October 2009 the tenant entered creditors’ voluntary winding up and the defendants in the case were appointed joint liquidators. Shortly after appointment, the liquidators sought to surrender the leases at the premises and agreed terms with the landlord which had the effect of releasing the parties from all rights and obligations contained in the lease: “whether arising on or after, but not before the date of [the] surrender”…

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