As a gen­er­al rule of thumb, a com­mer­cial Lease will pro­vide that a Ten­ant can­not assign part of their Lease, but that they can assign the whole of their Lease with the con­sent of their Land­lord. Gen­er­al­ly, a Landlord’s con­sent is not to be unrea­son­ably with­held. But what does this actu­al­ly mean?

Whether a Land­lord has rea­son­ably or unrea­son­ably refused con­sent to an assign­ment will be decid­ed by the facts and cir­cum­stances of the pro­posed assign­ment. A Land­lord can only refuse con­sent on grounds relat­ing to their rela­tion­ship with their Ten­ant and the Lease in ques­tion. Should the grounds for a Land­lord refus­ing con­sent to an assign­ment relate to their rela­tion­ship with their Ten­ant and the Lease in ques­tion, the Land­lord shall be oblig­ed to show that their refusal was rea­son­able (i.e. gen­uine and not unfound­ed). The main ques­tion to be asked in this sce­nario is;

“Were the con­clu­sions which led to the Land­lord refus­ing con­sent con­clu­sions that would have been reached by a rea­son­able per­son in the circumstances?”

A com­mer­cial Lease will also usu­al­ly spec­i­fy that a Landlord’s con­sent may be grant­ed sub­ject to cer­tain con­di­tions. There are two con­di­tions that are reg­u­lar­ly spec­i­fied by Landlords:

1. That the Ten­ant enters into an autho­rised guar­an­tee agree­ment — an autho­rised guar­an­tee agree­ment is a form of guar­an­tee giv­en by an out­go­ing Ten­ant of it’s assignee’s oblig­a­tions under the Lease which shall endure until such time as the assignee is no longer the Tenant

2. That a per­son of stand­ing accept­able to the Land­lord enters into a guar­an­tee and indem­ni­ty as a Guar­an­tor — a guar­an­tee and indem­ni­ty is a guar­an­tee giv­en by a third par­ty guar­an­tee­ing that a Ten­ant shall pay the rents reserved by a Lease and observe and per­form the Ten­ant covenants of the Lease. Should the Ten­ant fail to pay the rents or observe and per­form the Ten­ant covenants, the Guar­an­tor shall instead pay the rents or observe and per­form the Ten­ant covenants

Fur­ther­more, most com­mer­cial Leas­es will spec­i­fy cir­cum­stances in which the Land­lord may refuse con­sent to an assign­ment. Two cir­cum­stances com­mon­ly spec­i­fied by Land­lords are:

1. If at the date of the Tenant’s appli­ca­tion for con­sent to assign the Lease the rent or any oth­er mon­ey due under the Lease is out­stand­ing or there is a breach of covenant by the Ten­ant that has not been remedied

2. In the Landlord’s opin­ion the assignee is not of suf­fi­cient finan­cial stand­ing to enable it to com­ply with the Tenant’s covenants and con­di­tions con­tained in the Lease

The first cir­cum­stance is fac­tu­al and as such will always be valid, where­as the sec­ond cir­cum­stance is dis­cre­tionary and as such may some­times be invalid.

Despite the above con­di­tions and cir­cum­stances often being detailed in a com­mer­cial Lease, more often than not there will be a dis­claimer clause in the Lease which pro­vides that Land­lord may give con­sent sub­ject to any oth­er rea­son­able con­di­tion and that they may refuse con­sent in any oth­er cir­cum­stance where it is rea­son­able to do so.

Underlettings

In a sim­i­lar vein to assign­ments, a com­mer­cial Lease will usu­al­ly pro­vide that a Ten­ant can­not under­let part of their Prop­er­ty, but that they can under­let the whole of their Prop­er­ty with the con­sent of their Land­lord, with such con­sent not to be unrea­son­ably withheld.

Often, a Land­lord is more amenable to a Ten­ant under­let­ting their Prop­er­ty than to the Ten­ant assign­ing their Lease. This is because the rent will con­tin­ue to be paid by the Ten­ant and the Land­lord will still be able to enforce the Ten­ant covenants against the Ten­ant. A Land­lord will still wish to exer­cise a degree of con­trol over under­let­tings for the fol­low­ing reasons:

1. The agreed rent of an Under­lease could be tak­en into con­sid­er­a­tion when review­ing the rent of the Head Lease and as such the Land­lord will usu­al­ly require that the rent payable under the Under­lease is not less than the full open mar­ket rental val­ue of the Prop­er­ty at the date of the underletting

2. A fail­ure to exclude the pro­vi­sions of sec­tions 24 to 28 of the Land­lord and Ten­ant Act 1954 from apply­ing to the ten­an­cy cre­at­ed by the Under­lease may result in the Under­tenant being able to apply to the court for a new Lease should the Ten­ant not be in occu­pa­tion at the end of the Head Lease

To see whether we can assign an exist­ing Lease, please get in touch with Luke Hewitt on 01625 523988 or mail@​JBGass.​com