The main purpose of a deed of surrender is to allow one of the parties to a lease agreement such as the renter to renounce their claim to a real property and revert it back to the titleholder. Such a deed is normally used when the landlord and tenant amicably decide to terminate the lease to a property before its maturity.

In business, the deed of surrender is mostly applied by tenants who want to change the legal structure of their business and want to sign a new lease under their new legal entity. For example, a sole proprietor might apply for a deed of surrender after forming an LLC in order to terminate his current lease, and sign a new one under the new business name.

How a deed of surrender works

A deed of surrender typically releases both parties from future demands and claims by the other party. Such a deed is best suited to situations where neither party has violated the terms of their lease as it is usually a mutual agreement between the parties involved.

A landlord should not sign a deed of surrender if the tenant owes them back rent as this would mean that they have given up their right to collect the accrued rent. A deed of surrender typically stipulates the condition in which the tenant must leave the property, which may include removing equipment, signage and other items that do not belong to the landlord.

Key clauses in a deed of surrender

Some of the key clauses in a deed of surrender include the requirement that the tenant must pay all due rents and charges stipulated in the lease agreement up to the surrender date. Some deeds may include the condition that the parties involved may enter into another lease if some conditions are fulfilled.

The deed should also release both parties from any claims that may arise in future if the lease was still in force once the surrender date has passed. This protects both the tenant and landlord from any future legal claims after the surrender date.

Issues you should know about

You should be familiar with all the conditions set out for the deed to come into full effect thereby terminating the lease. You should always engage the services of a leasing lawyer to review the deed in order to ascertain that the conditions are clear and reasonable for both parties.

You should also be aware of the costs that you may have to pay, which could be your legal costs, the landlord’s legal costs, stamp duty, or the lease registration fees.