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Whether you are a commercial landlord or tenant, if you need professional legal advice regarding consent to assign a commercial lease, please contact Myerson Solicitor's Commercial Property solicitors at:
Assignment of a commercial lease is an attractive option for tenants of commercial properties who wish to divest themselves of their lease.
Commercial property tenants often find themselves trapped in a lease with time left to run, where the landlord does not consent to surrender, and the lease itself does not facilitate a break option.
Various reasons exist that may contribute towards the tenant wishing to divest themselves of their lease, such as business expansion or reduction, the property being no longer suited to business needs, or an agreement that the lease will be assigned to the purchaser upon the sale of a business.
Assignment of the lease facilitates the ability to transfer the lease from the current tenant (the 'assignor') to a new tenant (the 'assignee'); the result being that a new entity steps into the shoes of the assignor along with taking on the obligations and liabilities under the lease.
Where the provisions of the lease are silent as to assignment, then the tenant is ultimately free to assign the lease without obtaining the landlord's consent.
However, modern commercial leases usually stipulate that the tenant must obtain the landlord's consent before they can assign the lease to another entity.
It is also unlikely that the lease will allow for the assignment of part only.
Primarily, landlords seek to ensure that the income they receive from rented properties is guaranteed to protect the value of their investment.
Landlords wish to have commercial tenants who are able to pay the rent in full on the specified dates due and are able to keep the property in good condition and state of repair.
Accordingly, landlords often seek to control who the lease can be assigned to by stipulating that their prior consent must be obtained before assigning the lease.
Section 19(1A) of the Landlord and Tenant Act 1927 allows parties to outline in the lease certain circumstances in which consent to assign can be withheld by the landlord and any conditions to be satisfied for consent to be given.
Therefore, the tenant should consider the relevant alienation clause within the lease to determine any listed circumstances or conditions subject to which consent may be provided.
Common circumstances in which landlords argue that refusal is reasonable include the following:
Common conditions which a landlord may impose before the lease can be assigned include the following:
There are several reasons why a landlord may wish to withhold consent to assign; however, section 19(1) of the Landlord and Tenant Act 1927 (LTA 1927) outlines that the landlord is under a duty to not unreasonably withhold consent to assign.
Further, where a written application to assign is served upon the landlord, the landlord shall:
Consent decisions are very fact-specific, but case law outlines that refusal is likely to be deemed unreasonable when:
The landlord's consent to assign a lease is a crucial step in the leasing process, ensuring that both parties are protected and that the property is properly managed.
Tenants seeking to assign their lease should carefully follow the procedures outlined in their lease agreement and work collaboratively with their landlord to obtain consent.
By doing so, they can facilitate a smooth transition and avoid potential legal pitfalls.
Whether you are a commercial landlord or tenant, if you need professional legal advice regarding consent to assign a commercial lease, please contact Myerson Solicitor's Commercial Property solicitors at: