This cheatsheet includes practical tips to understand key clauses and avoid disputes in leasing agreements.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n
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Under an assignment, the tenant effectively sells their lease to the assignee. The lease still exists, but the lease obligations fall on the assignee.<\/p>\n<\/div>\n\n\n\n
The rights to assign a commercial lease and the rules that accompany it should be evident in the commercial lease agreement. Any alienation provisions in the lease will contain these details. For example, a tenant will not usually be able to assign a lease where there is an outstanding breach of the commercial lease. <\/p>\n\n\n\n
Key Points to Consider in a Lease Assignment <\/h2>\n\n\n\n
There are some key points a commercial landlord and commercial tenant needs to know about an assignment in a commercial lease. We explain some of these below.<\/p>\n\n\n\n
1. What Happens If The Lease Agreement Does Not Contain Assignment Provisions?<\/h3>\n\n\n\n
Where there has been express agreement that the right to occupy the premises granted is only personal to the tenant, assignment is not allowed. On the other hand, where a commercial lease does not provide provisions on assignment, this means that there are no restrictions on the commercial tenant should they wish to assign the lease. Therefore, commercial landlords cannot stop assignment or set rules about it when a tenant decides to assign their lease.<\/p>\n\n\n\n
2. Landlord\u2019s Consent<\/h3>\n\n\n\n
Where a commercial lease agreement does provide provisions on the assignment of the lease, it will likely state that the tenant must get consent from the landlord to assign the lease. The law states that a landlord cannot unreasonably delay or withhold their consent.<\/p>\n\n\n\n
Even if the lease agreement states otherwise, the lease cannot override the law. For example, if a lease provides that a landlord can give their consent after two months, the law will likely view this period as unreasonable. <\/p>\n\n\n\n
3. Authorised Guarantee Agreement (\u2018AGA\u2019)<\/h3>\n\n\n\n
When a commercial landlord does consent to a request to assign the lease from their tenant, they will likely attach conditions to this. These may include that the commercial tenant enters into an AGA<\/a>, which means that they act as a guarantor for:<\/p>\n\n\n\n This automatically applies to any lease someone granted or transferred to a tenant before 1st January 1996.<\/p>\n<\/div>\n\n\n\n However, for a lease entered into or transferred to on or after 1 January 1996, the lease can impose this condition. If a was entered into after this date and is silent on this, a landlord might be able to impose an AGA if it is reasonable.<\/p>\n\n\n\n Say a landlord imposes an AGA as a condition of the assignment. As a result, the previous tenant as the guarantor may have to pay all overdue sums and reimburse the landlord for costs and losses in respect of the default if the third party (the new tenant) defaults on the commercial lease. <\/p>\n\n\n\n A landlord can refuse consent to assign if it is reasonable to do so. This means that if the assignee does not have the financial capacity to take on the lease, the landlord can refuse the assignment. <\/p>\n\n\n\n However, the commercial lease agreement may impose other economic conditions, such as:<\/p>\n\n\n\n Nevertheless, any financial requirement the lease imposes must be reasonably lawful.<\/p>\n\n\n\n There may be other conditions a landlord may impose with an assignment. For example, they may want the assignee to use the same premises as the tenant who assigned the lease. They may also want to know what alterations<\/a>, if any, the assignee intends to carry out on the premises before they decide to allow the assignment. <\/p>\n\n\n\n In addition to conditions a landlord imposes on the tenant for assignment, the tenant and the assignee may impose cost conditions. For example, if the lease rent exceeds the market rate, the assignee may request a premium payment from the tenant. Alternatively, the tenant may insist on it from the assignee where the lease is under the market rate. <\/p>\n\n\n \n
\n 4. Financial Position<\/h3>\n\n\n\n
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5. Other Conditions<\/h3>\n\n\n\n
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\n Cheatsheet for UK Leasing Terms<\/div>\n \n