The Case of Failed Business in Buckhead and What It Says About the Law of Rental Property ‘surrender’ in Georgia

When you, as a landlord, ink a lease with a commercial tenant, you obviously hope the tenant’s business succeeds. Sometimes, though, that doesn’t happen. Failure happened a lot during the height of the COVID-19 pandemic in 2020. When your tenant gives up on their business and abandons the property they leased, you, as the landlord, have certain rights. When it comes to situations involving an abandoning tenant and negotiating a legal “surrender,” you should proceed with caution to avoid diminishing your potential unpaid rent recovery. That caution includes reaching out to a knowledgeable Atlanta landlord-tenant lawyer.

In 2008, we heard about the phrase “jingle mail,” which refers to “underwater” homeowners who gave up their homes by simply mailing the keys back to the bank. In a similar vein, sometimes your commercial tenant may give up and demonstrate that simply by — with no warning — evacuating the property and mailing the keys back to you.

When that happens (or your commercial tenant engages in similar acts of unannounced and unplanned abandonment of the property,) it is vitally important to understand a few things, including the concept of “surrender” and what, under Georgia law, does or does not constitute a surrender. A landlord-tenant case from here in Atlanta shines some light on these important concepts.

The tenant operated a restaurant and bar in a shopping plaza in Buckhead. In 2013, the parties signed a new lease that contained an end date of Oct. 31, 2022. In March 2020, the COVID-19 pandemic struck. The landlord closed the shopping center on March 19; the restaurant shut down four days later, never reopening.

The tenant stopped paying rent in April 2020. On Oct. 3, 2020, the tenant shipped the keys back to the landlord via FedEx. The landlord had no prior notice that the tenant was surrendering early.

On Oct. 16, the landlord sent the tenant a letter “acknowledging that [the tenant] had vacated the premises and stating that [the tenant] had 14 days to remove all of its personal property from the premises before it would deem the property abandoned.” An internal email between landlord employees stated that the landlord had possession of the unit effective Oct. 28. After retaking possession, the landlord did not change “the condition of the space or re-let the space to a new tenant.”

The landlord eventually sued for unpaid rent. In that case, the tenant argued that a legal surrender had been completed by Oct. 28, 2020, so it could not possibly owe rent for any period after that date. The trial judge agreed and awarded the tenant summary judgment on that point.

The Difference Between Surrender and Abandonment

The landlord appealed and was successful. The landlord successfully argued that there’s more to a legally valid surrender than just a tenant’s evacuation of the property and the landlord’s acknowledgment of that. Georgia law is clear that surrender, in contrast to abandonment, requires action by both the tenant and the landlord, whereas abandonment is a unilateral act by the tenant.

To have a legitimate surrender, the tenant must give up possession of the property before the lease ends and the landlord must accept possession “with intent that the lease be terminated.” Previous appeals court rulings have explained that a surrender requires clear proof of “a mutual agreement between lessor and lessee that the lease is terminated” or else actions by the landlord that “compel the conclusion that the landlord consented to retake possession of his property.”

In the Buckhead case, the appeals court determined that the landlord’s actions did not, as a matter of law, “compel the conclusion” that the landlord agreed to the surrender. That meant that the tenant wasn’t entitled to summary judgment and the landlord was permitted to press its case for rent after Oct. 28, 2020, at trial.

Whatever the reason, sometimes seemingly promising tenants fail. When they do, it can be especially important to your bottom line to understand exactly what your rights and responsibilities as a landlord are. These issues can become even more complex if the tenant files for bankruptcy. Whether you’re needing to recover unpaid rent or other relief, count on the experienced Atlanta commercial landlord attorneys at Poole Huffman, LLC to be the powerful and effective ally you need to get your circumstance resolved quickly and successfully. Contact us online or by calling 404-373-4008 to schedule your confidential consultation today.