The majority of commercial leases will allow for the whole of the lease to be assigned from the current tenant to a new one, providing that the landlord agrees to this.
What this means is that, should you want to assign a commercial lease, you will have to apply to your landlord to do so.
Our guide below sets out the best way for you to assign a lease, and things you need to consider.
Licence to Assign
Should the landlord consent to the assignment, this permission needs to be granted by way of a legal document called a Licence to Assign. Applications for a Licence to Assign are governed by the Landlord and Tenant Act 1988 (“the Act”).
Under the terms of the Act, the landlord is under an obligation to provide consent, except where it is reasonable not to do so and to provide that consent within a reasonable timeframe.
Terms of an assignment
The landlord or their representatives will then generally respond to the tenant in writing setting out their terms. These will usually consist of:
1. Their legal fees being paid for them
2. Evidence of the financial standing of the new tenant
3. The current tenant entering into an Authorise Guarantee Agreement whereby they essentially act as a guarantor to the new tenant.
What if the landlord doesn’t agree to an assignment?
It is important to note that the landlord’s obligations under the Act begin when the tenant makes the application to assign the lease. Generally, applications for an assignment are made informally to the landlord or their agent, with a tenant emailing or telephoning asking if they would have a problem with an assignment. Therefore, one might expect that should several weeks have passed without a response from the landlord, or if the landlord was not agreeable to a lease assignment (and unreasonably so), an application could be made to court for a court declaration that the landlord has behaved unreasonably, or for a court order granting the lease assignment.
Unfortunately, should the approach to the landlord have been made in such informal terms, the tenant would be deemed by the courts to have not properly served a request for a lease assignment on the landlord. Under the terms of the Act, such an application must be served within accordance of the terms of the lease. Usually, this means that it must be set out in writing and sent to an address set out in the lease. In the majority of cases, notices must be served by post (usually first class) and rarely is email or fax allowed for.
Should the lease not have any notice requirements, notice must be served in accordance with section 23 of the Landlord and Tenant Act 1927.
You should also ensure that any application made to the landlord is complete and this therefore means including any references which may be required under the assignment clause in the lease.
Speak to an expert
It is important to speak with your solicitor before making any applications for lease assignment so that you can be sure that you are serving the notice in the correct manner and not prejudicing your position in any future court proceedings.
Whether you are a landlord or tenant it’s important understand your legal position regarding lease assignments. Contact a member of our commercial property team today for a no obligation discussion on 0845 287 0939 or submit your enquiry online.
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