Most business leases permit a tenant to assign (or sell) the lease subject to obtaining the landlord’s consent. The landlord’s consent is usually given in a formal licence to assign. Before a landlord will give consent he will usually want to be satisfied that the incoming tenant will be able to pay the rent and perform the other tenant covenants in the lease.
It is open to a landlord to request a guarantor or a rent deposit if the incoming tenant is of poor covenant strength. Once the landlord’s consent has been obtained, the tenant and assignee can enter into a deed of assignment to transfer the lease to the assignee. If the lease is registered at the Land Registry the assignee will then need to register the assignment at the Land Registry.
In this folder we have a Tenant’s Letter seeking Consent to Assign, Heads of Terms for Assignments, Deeds of Assignment, Land Registry Form AP1 and Notice of Assignment. These documents will help tenants to handle a proposed assignment of a lease effectively.
Tenants should refer to the Protocol for Applications for Consent to Assign or Sublet when making an application for consent to assign. The Protocol can be found at http://www.propertyprotocols.co.uk. Compliance with the Protocol is voluntary but the Protocol has broad support in the commercial property sector. Our documents are designed to help the parties comply with the Protocol.
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Frequently Asked Questions
I want to assign my commercial lease, can I? +
Usually yes, with consent. Most business leases permit assignment provided you obtain the landlord's consent, given in a formal licence to assign. Before agreeing, the landlord will normally want to be satisfied that the incoming tenant can pay the rent and perform the covenants, and may ask for a guarantor or a rent deposit where the assignee is of weaker covenant strength. Once consent is given, the tenant and assignee complete a deed of assignment. Simply-Docs provides the tenant letter, licence and deed.
Can my landlord unreasonably refuse consent to assign? +
Not where the covenant is qualified. If the lease bars assignment only without consent, section 19(1) of the Landlord and Tenant Act 1927 implies that consent must not be unreasonably withheld, and the Landlord and Tenant Act 1988 requires the landlord to deal with your written application within a reasonable time, give a written decision and show that any refusal or condition was reasonable. A lease can, however, set out agreed conditions or circumstances for consent that the landlord may rely on.
Will I stay liable for the lease after I assign it? +
For most modern leases, not indefinitely, but you may have to guarantee your buyer. On a new tenancy granted on or after 1 January 1996, the Landlord and Tenant (Covenants) Act 1995 releases the outgoing tenant from the lease covenants on a lawful assignment. As a condition of consent, though, the landlord can require you to give an authorised guarantee agreement guaranteeing the immediate assignee, so you remain on the hook for that one assignee until they in turn assign. Older leases granted before 1996 can leave you liable for the whole term.
What documents do I need to assign a commercial lease? +
Typically a tenant letter seeking consent to assign, heads of terms for the assignment, the landlord's licence to assign, a deed of assignment to transfer the lease to the assignee and, if the lease is registered, a Land Registry application to register the assignment. You may also serve a notice of assignment where the lease requires it. Simply-Docs provides these tenant documents, including Land Registry form AP1. Using the sector protocol for consent applications helps the process run smoothly.
