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Leases – Assigning a Lease

Leases can be assigned for a variety of reasons. It is one of the ways a tenant can let go of a property if they no longer wish to (or can no longer afford to) trade from there. It can be used when a tenant is selling its business, to transfer the premises to the buyer.

There are several factors to consider when looking at assignment of a lease:

Landlord’s Consent

In order to assign a lease, you will normally need to obtain landlord’s consent. Take a look at the alienation and assignment clauses in your lease. It will often state that the tenant can assign the lease, with the consent of the landlord, not to be unreasonably withheld or delayed. There will often be detailed conditions on the provision of this consent. It is worth instructing a Commercial Property Solicitor to review these, whether you are a landlord or a tenant. Landlord’s consent is usually provided via a formal licence to assign.

Lease Assignment – Reasonableness

Sometimes a lease absolutely prohibits the assignment of the lease. This may be done where the landlord may have granted favorable terms to a particular tenant, and they don’t want those being assigned to a third party. However, most leases will permit assignment of the whole of the premises. Section 19(1) of the Landlord and Tenant Act 1927 will imply into this clause an obligation on the Landlord not to unreasonably withhold consent. This is why it it is really important to take expert legal advice when dealing with a lease assignment. There are a number of items that will be implied by statute, that will not be obvious from just reading the lease. For a free, no obligation chat, please contact me using any of the following methods:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

Client Review

Lease Assignment - 32 Broad Street, Lyme Regis

“John McLean came highly recommended and I’m so pleased we instructed him for a license to assign. He was really thorough and explains things clearly in an easy to understand way. He is very quick to respond, in fact the fastest solicitor I’ve ever used! I’ll definitely be using him again. I’m very happy with the work he did.”

Kay Hallinan, Landlord

Lease Assignment – Conditions for Consent

Lease assignment usually involves compliance with certain conditions. These are often laid out in a lease by reference to S.19(1A) Landlord and Tenant Act 1927. This is super important. In broad terms, S.19(1A) LTA 1927 will make the conditions (and circumstances) laid out in respect of that provision automatically reasonable. This means that if they are not satisfied, the landlord can point blank refuse consent. That is important to know, whether you are a landlord or a tenant, as it can radically alter your bargaining position.

Lease Assignment – Landlord’s Concerns

If you are a landlord, then your main concern is keeping a tenant on the hook who can pay the rent (or you have some protection against if they don’t). Things to be thinking about are:

  • Have you seen financial information, which confirms the covenant strength of the proposed tenant? If not, ask for it – 3 years’ of accounts is a good place to start.
  • Have you got a strong tenant already on the hook? If so, consider requiring an Authorised Guarantee Agreement (“AGA”) from an outgoing tenant, to keep them on the hook for the incoming assignee’s covenants.
  • Have you got any security if the assignee doesn’t pay the rent. For example, a guarantor, or a rent deposit. There are pros and cons to these. A rent deposit is often the simplest to enforce, as you have a pot of money sitting there waiting to be called on. However, it is only ever going to be a finite sum (something like 3 or 6 months). A guarantor can provide a longer term solution, but can require you to take legal action to enforce (e.g. to sue the guarantor for the rent).

Lease Assignment – Tenant’s Concerns

If you are a tenant, then you should be looking at the assignment provisions of the lease when you take on the lease in the first place. I’ve lost count of the number of people who take on leases, not remotely concerned about getting rid of them, but then in 2 years time are coming back to me asking that very question. Break clauses are one option, and surrenders another. However, these are not always present (or a landlord is not always willing to accept a surrender – it will depend on whether they can line up a better tenant than you). So, assignment provisions are very important. Have a look at:

  • Is the requirement for an AGA automatic, or is it only to be given where reasonable? The latter is much better, otherwise you will find yourself unable to avoid giving one. This will keep liability on you for longer than you are the tenant (essentially until your assignee assigns on the lease again, if that ever happens).
  • What is the covenant strength like of the tenant you are trying to sell or assign to? If it is weak, the landlord is likely to want security from them – rent deposit, guarantor, etc.
  • Is there another option? Is there a break clause you can exercise? Might the landlord enter into a new lease with the new tenant, leaving you off the hook for the old one?
  • Be prepared for legal fees – you will need to bear these for the landlord, in the vast majority of cases.

Get in Touch

If you would like to have a further chat about any of the above, or ask me to give you a quotation, please do contact me.  For a free, no-obligation discussion you can:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

I aim to respond to enquiries within 24 hours.  Just let me know when you contact me which is your preferred means of contact.

John McLean Commercial Property Solicitor

John McLean Commercial Property Solicitor

Examples of my experience include:

  • Acting for a Birmingham based property company on the leasing of its city-wide property portfolio, including applications for assignment and licences to assign.
  • Acting for multiple local and national business taking leases of office space, shops and industrial units.
  • Acting for lots of smaller individual landlords or tenants, assigning leases of commercial property.
Commercial Property Solicitor Birmingham

“We have worked with John on a number of projects and have found him to be exceptionally thorough. He has also been able to distil complex legal points into real world options that are clearly explained and actioned. We would not hesitate to recommend him for purchases, leases, legal reports or anything property related.”

John Green, Director Smalldene (Midlands) Limited

Lease Assignments – Summary

If you are dealing with the assignment of a lease, I can help you. I have acted for landlords and tenants for over 16 years in successfully assigning, or seeking consent to assign, or negotiating licences to assign. It is important to note that there is a lot of statutory “overlay” to an assignment transaction, which is why you need to seek advice from an expert. Otherwise, you could end up on missing out on security, or overcommitting, when an understanding of the law would have helped you negotiate the best position for you.

I’m always happy to speak to people with queries about commercial properties. Landlords and tenant both want the job completed on time and on budget, and that is what I pride myself on delivering.

Contact Me

If you would like to have a further chat about any of the above, or ask me to give you a quotation, please give me a call or contact me.  For a free, no-obligation discussion you can:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

I typically respond to enquiries within 24 hours.  Just let me know when you contact me which is your preferred means of contact.

If instructed, all work is carried out through Nexa Law Limited, who carry all the necessary professional indemnity insurance and infrastructure to ensure that your transaction is handled safely and securely.  You can find out more detail about Nexa here.

You won’t find yourself dealing with a more junior solicitor, or a paralegal – all work is carried out by me, so you have an experienced pair of hands at all times, and a single point of contact.

If you have any further queries, please do not hesitate to contact me.

The Legal Bit

Finally, the above article is for general information purposes only.  I am not providing legal advice in the above and it may or may not be appropriate for your specific circumstances.  If you require legal advice, please do get in touch at enquiries@mcleanlegal.co.uk and I will be delighted to assist.

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John McLean is a Partner with Nexa Law, which is authorised and regulated by the Solicitors Regulation Authority (Licence Number 633024). All work is carried out through Nexa Law.

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