Commercial

Lease Assignment

Sometimes tenants of commercial properties need to be able to get out of their leases early. One way to do this is through lease assignment. Assigning a lease is transferring the legal interest of a property from one tenant to another. Whether you are a tenant or landlord our experienced commercial property solicitors are here to advise you about lease assignment.

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How do you assign a lease?

Most commercial leases allow lease assignment. Usually – but not always – the tenant will need to obtain the landlord’s permission. Under the Landlord and Tenant Act 1927 the landlord can only refuse to grant their consent with good reason.

For example, a landlord might refuse permission if a new tenant wants to change the use of the property, if they are not financially stable or if their references are poor. The landlord’s solicitor will carry out the same legal checks with the tenant taking over the lease as they did with the original tenant.

Once the solicitor is satisfied that all checks have been met, they will draft:

A License to Assign. This is a document that transfers the lease from one tenant to another.
A Rent Deposit Deed. They may also draft an Authorised Guarantee Agreement. This is an agreement in which the original tenant guarantees that the new tenant will meet the terms of the lease.

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What is the difference between a lease assignment and a sublease?

When a lease is assigned, a new tenant takes over the original tenant’s obligations under the lease. However, it is important to note that sometimes the original tenant will be obliged, under the terms of lease, to guarantee the performance of the new tenant. This can be subject to negotiation with the landlord, so it is important to seek legal advice.

When a property is sublet, the original tenant is legally bound to the terms of the lease. Properties are usually sublet when a tenant no longer needs the space for their business. When a property is sublet a short sub-lease can be created from the terms of the original lease.

Can you assign a lease without the landlord’s permission?

Whether or not a lease can be assigned without the landlord’s permission depends upon what is stated in the lease. If there is no mention of lease assignment in the lease the tenant is free to assign the lease without the landlord’s permission.

If you are a tenant who would like to assign a lease it is important to seek legal advice because failure to obtain a landlord’s permission when you should, can result in financial penalties and enforcement action.

Commercial lease assignment advice

Davisons solicitors have many years of experience in commercial lease assignment. We can help you to decide whether this option is right for your business by advising you about your obligations under the lease and any potential pitfalls.

Have any questions or need any help?

Our team of specialist lawyers are experts in their field. Be confident in their advice and decisions to help get the right outcome for you. Contact us today to see how we can help

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Lease Assignment FAQs

Who pays for assignment of a commercial lease?

The original tenant and the new tenant are likely to be liable for all the costs of the assignment of a commercial lease. These costs are likely to include the landlord’s costs, even if the application is not approved.

What is lease assignment fee?

To assign a lease a tenant will normally have to seek the landlord’s permission. If permission is granted the landlord’s solicitor will draw up a Licence to Assign. The fee to draw up the Licence to Assign is usually charged to the original tenant.