Accepting rental payments from third parties—landlord’s considerations
Accepting rental payments from third parties—landlord’s considerations

The following Property Disputes guidance note provides comprehensive and up to date legal information covering:

  • Accepting rental payments from third parties—landlord’s considerations
  • Surrender by operation of law
  • Estoppel from denying assignment
  • Practical considerations

The issue of whether or not to accept rental payments from third parties sometimes arises, particularly in the following commercial contexts:

  1. where a company related to the tenant company (such as a parent company or subsidiary) tenders the rent

  2. where the tenant is proposing to, or is in the process of, assigning their lease

  3. where the tenant company is insolvent (for example in administration) and a third party is interested in occupying the premises

There are various potential implications for a landlord to consider before accepting rental payments from third parties, including arguments that a surrender by operation of law and re-grant has arisen or that the landlord is estopped from denying that an assignment has taken place.

Surrender by operation of law

One potential risk to take into account is whether or not accepting rent from a third party may give rise to a surrender by operation of law and grant of a new implied lease to the third party which has tendered the rent (see Practice Note: Surrender by operation of law). In a business lease scenario, as the new lease would be an implied periodic tenancy, it would automatically have security of tenure under the Landlord and Tenant Act 1954, Part II (LTA 1954) (see Practice Note:Periodic tenancies—Protection of Landlord and Tenant Act 1954 (LTA 1954), Pt II). However, whether or not a surrender by operation of law ha