Tag Archives: surrenders of leases

Mortgages prevented lease surrenders which were basis of guarantor release

The Co-Operative Bank Plc v Hayes Freehold Ltd & Ors [2016] was a preliminary hearing in respect of a striking out/summary dismissal application. Here a head lease was granted out of a freehold which was now mortgaged to The Coop Bank. The mortgage prohibited the mortgagor accepting a surrender of a lease without the Coop Bank’s consent.

An underlease had been granted out of the head lease. The underlease was also mortgaged to The Coop Bank so it could not be surrendered without the Bank having released it from that mortgage.

There was a composite deal in which both the head lease and the underlease were purportedly surrendered without the consent of The Coop Bank.

Clause 6 of the surrender of the underlease purportedly released the undertenant and it’s guarantor from further compliance with the underlease.

The High Court ruled that both surrenders were ineffective as the Bank’s consent had not been obtained.

The court also said that the fundamental assumption behind Clause 6 was that the surrender package would be effective. That assumption being disappointed the underlease guarantor remained bound by the guarantee in the underlease.

The Coop Bank therefore had an arguable case in support of it’s interests that must go to full hearing.

The blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.