Deutsche Bank has been left on the hook for rent of £2.6m a year after its attempt to surrender a headlease failed.  The surrender was declared void after it emerged that the property owner, Hayes Freehold, had mortgaged the freehold to Co-operative Bank.

Deutsche was the leaseholder of the commercial property in West London.  It had sublet the property, with a guarantee provided by Sentrum Holdings.  In 2015, the parties agreed to surrender the headlease and sublease and to release Sentrum Holdings from its guarantee.

Unfortunately, Deutsche’s solicitor failed to check the freehold title, so was unaware that the property was mortgaged to Co-operative Bank.  The bank’s consent was required to surrender the headlease.  This was not obtained, so Deutshe was not released from its lease obligations.

The surrender of the sublease and release of the guarantor were successful however, leaving Deutsche responsible for the £2.6m annual rent on the property.

Deutsche unsuccessfully brought an action in the High Court, claiming that the surrender of the sub-lease and guarantee should also be declared void.

This case shows just how important it is to check the landlord’s title before trying to end a lease, in case there is a mortgage or other conditions which prevent surrender.” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “If Deutsche wants to recover its loss, it may have little choice but to start a professional negligence case against its solicitor. We’ll have to see what happens next.”

Reports of the case have been published by Property Week and Browne Jacobson.

Brunel provides a wide range of Professional Indemnity Insurance broking services to property professionals.  Click here to find out more, or call Mark Sommariva on 0203 475 3275.