Sale with vacant possession - lease still noted?

An appeal in the case of Area Estates Ltd v Weir [2010] EWCA Civ 801 has failed. Weir had contracted to buy freehold property from the appellant with vacant possession. In the register of title, there appeared an entry relating to a nine year lease of the property granted in 2004. The lease had allegedly been surrendered by the tenant, to the seller, in August 2006, but notice of the lease had not been removed from the register. In the sale contract, the seller promised to give vacant possession, and other terms stated that the lease, whilst still referred to on the register, had been determined by operation of law, and that the buyer would “accept the position and shall not be entitled to require any further proof of the determination.” Unfortunately, the lease had not been validly surrendered since, at the time of the alleged surrender, a petition in bankruptcy had been presented against the tenant. As the tenant had subsequently been declared bankrupt on that petition, the surrender was a disposition of property that was rendered void by section 284 Insolvency Act 1986. The buyer was therefore able successfully to rescind.

Moral of the case? (1) Clean the title up where a lease apparently comes to an end - especially if you intend to sell with vacant possession. (2) Treat all surrenders as acquisitions, so that you can be sure that the tenant has an unfettered right to effect the surrender.