As a commercial tenant, you may not be able to honour your commercial lease for the entire lease term. The lease term refers to the time period in which you occupy the property. This property may be your business\u2019 HQ, warehouse or distribution centre. There are various reasons as to why you may want to terminate your lease early and assign the lease. This article will explain the three critical instructions for assigning a UK commercial lease.<\/p>\n\n\n\n
Assignment is a property transfer by the \u2018assignor\u2019 (the holder of the property) to the \u2018assignee\u2019 (the person receiving the property). As the commercial tenant, you are also the \u2018assignor\u2019 and, as such, may effectively assign your lease to another business owner. At this point, they become the new commercial tenant. This means that the new tenant is liable for the lease obligations in the commercial lease, such as rent payments and repair obligations.\u00a0<\/p>\n\n\n\n
The effect of an assignment is that you are now no longer a party to the lease. However, you will still be liable for the lease obligations if your landlord requires you to guarantee the new tenant\u2019s lease obligations. This will be where an Authorised Guarantee Agreement (AGA) is put in place.\u00a0<\/p>\n\n\n\n
Whilst some commercial leases may not allow lease assignment, those which do will generally have conditions attached for the assignment to be valid. The assignment provision may detail whether there are conditions you must satisfy. <\/p>\n\n\n\n
If you want to assign your commercial lease, you must know how to do so. Below, we detail three essential instructions to assign a UK commercial lease.\u00a0<\/p>\n\n\n\n
If you wish to assign your commercial lease, the first step will be to find a suitable business owner. They will be the assignee. A potential assignee will want first to inspect the lease terms in your commercial lease agreement before they agree to take on the lease. One term they will specifically look for is the permitted use of the commercial premises. This is because they will need to ensure that their business activities can occur on the commercial premises.\u00a0<\/p>\n\n\n\n
They may also want to carry out checks on, for example:<\/p>\n\n\n\n
It is not just your prospective assignee who will carry out checks when you assign the lease. You also will want to carry out checks on your prospective assignee, as will your commercial landlord. It is best to pre-empt the checks your landlord will carry out to ensure you select an assignee who can meet them satisfactorily. For example, you will need to check your assignee\u2019s:<\/p>\n\n\n\n
Once you are satisfied you have found a suitable assignee for your lease assignment, you will likely need to get your commercial landlord’s consent before you assign your commercial lease. You should do this as soon as possible. UK law states that your landlord must respond to your request without unreasonable delay and should not unreasonably refuse to give consent for the lease assignment. It is advisable to get a solicitor to assist you with this.<\/p>\n\n\n\n
Before you assign the lease to a specific business owner, you will also have to get your landlord\u2019s consent that you may indeed assign the lease to this person. A landlord may include conditions in the commercial lease agreement as to who the assignee can be to ensure that the prospective tenant:<\/p>\n\n\n\n
Your landlord has the right to ask you to provide documents and information about the assignee. Your landlord may require information about your assignee’s position, such as their financial status, which you should have previously checked.<\/p>\n\n\n\n
Once your landlord agrees to assign the lease, they will give you a document which is a licence to assign. They may also require you to sign an Authorised Guarantee Agreement. Your solicitor will typically review both documents before the documents are finalised and thereafter become binding.<\/p>\n<\/div>\n\n\n\n
If your commercial lease details no conditions surrounding the assignment of a lease, such as the need to get your landlord\u2019s consent, you will not need a licence to assign the lease.<\/p>\n\n\n\n
Once you have found a business owner to be the assignee for your commercial lease and your landlord consents to them being the new commercial tenant, you can start the lease transfer process and assign the lease. <\/p>\n\n\n\n
As the tenant, you are responsible for assigning the lease. The process might vary depending on the lease term. If the lease is for seven years or more, you should use a Land Registry form which is a TR1. This method involves a simple transfer of the lease and is suitable where your lease is a registered lease. Where your commercial lease is less than seven years, you can assign it with a deed of assignment. This method is suitable where the commercial lease is unregistered. <\/p>\n\n\n\n
Once the landlord consents to the proposed new tenant, the landlord and the new tenant will enter into a deed of assignment. This is the formal document that transfers your lease to the new tenant. It ends your duties concerning the lease, which the new tenant then takes over and agrees to be bound by. Since this is a legal document that all parties will need legal advice on, you and the new tenant must decide who will pay for the landlord\u2019s legal fees.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n