Assignments of Business Leases
Preparing to assign a business lease
Sometimes a tenant needs to leave its premises before the end of the term of its lease and decides to assign (or sell) the lease to a new tenant. Before taking any further steps, the tenant needs to check the terms of the lease carefully to see whether assignments are permitted and whether any conditions need to be satisfied.
The landlord’s consent is almost always required for an assignment. The tenant will need to make a formal application for consent, supported by full information about the proposed assignee.
Obtaining the landlord’s consent – the licence to assign
If the landlord has agreed in principle to a proposed assignment of the lease, the next stage is to negotiate and complete a formal licence to assign to document the landlord’s consent. The licence may include an authorised guarantee agreement (AGA) whereby the outgoing tenant stands as guarantor for the incoming tenant.
Completion of assignment
Once a licence to assign has been completed the tenant and assignee are free to complete the assignment of the lease. This will require either a deed of assignment or a Land Registry transfer.
After completion of the assignment
The assignee will usually be required to give the landlord “notice of assignment”. There may also be stamp duty land tax (SDLT) and Land Registry requirements to comply with, depending on the amount of any premium paid for the assignment and whether the lease is (or should be) registered.