Does your business tenant want to assign his lease?

News - 01/02/2016

Where do you stand as a landlord of commercial premises whose tenant wants to assign his lease to someone else, perhaps because he is selling his business?

Most business leases contain restrictions on assignment and sub-letting. If the lease says your consent is needed for an assignment, this must not be unreasonably withheld. However, the lease may say that refusal of consent will be reasonable if certain conditions are not satisfied.

Such conditions may entitle you to insist that the outgoing tenant guarantees the obligations of his successor until the next assignment and/or that the incoming tenant, especially if it is a company, provides a new guarantor.

In any case you can refuse consent if you are not reasonably satisfied that the incoming tenant will be able to pay the rent and meet his other obligations under the lease. Before making a decision it is usual to take up and consider references for the new tenant and any required guarantor(s). If these are not satisfactory but you still want to give consent, you might want to ask the new tenant to provide a rent deposit.

If you decide to grant consent, this should be done only by means of a special document (called a “Licence to Assign”) in which the new tenant and any guarantors take on various obligations, so that you can make sure the rent is paid and the other requirements of the lease are complied with, or that you are compensated if they are not. If a rent deposit is paid, what happens to it will be regulated by a separate document signed by you, the new tenant and any guarantors.

In view of these matters you will need expert legal advice and representation from the time the tenant requests consent until either the application is refused or consent is granted. We will first check and advise you on the relevant provisions in the lease and obtain the tenant’s solicitors’ undertaking to pay your legal costs. We can then take up references for the assignee, help you to consider them, negotiate any special terms on which consent may be granted and prepare the documents needed to give effect to those terms.

As soon as you receive the tenant’s request, we therefore recommend that you contact Graham Whitworth at our Teddington office on 020 8614 4577, [email protected] or another member of our Commercial Property teamwho will be able to guide you through the entire process and ensure that the value of your investment property is protected.

And remember – this need not cost you anything, as the lease will normally provide that all costs are met by the tenant.

 

Disclaimer:

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.