Solicitors for lease assignment
There are good reasons why many tenants with growing businesses want the security of talking out a long lease, whether for an office, industrial unit or shop. Circumstances change however and in many cases, part way through the lease, the tenant decides to move on. In that situation, where there is an existing lease and a willing new tenant is found, a solution is lease assignment.
Assignment means, in legal terms, that the existing tenant transfers the contract to a new tenant. In order to do so, the Landlord must consent to the assignment and there are generally other complications.
Lease assignment – what to expect
- The proposed new tenant, whilst not being able in most cases to renegotiate or vary the terms of the lease will still want to make enquiries about the property via lawyers. Enquiries will focus on the condition of the premises and a new tenant will need solicitors to check the terms of the lease in key areas such as service charges, maintenance, rent review, break clause. This will create some cost and delay.
- The outgoing tenant, unlike with most other forms of contract assignment, will still invariably be required to guarantee the tenant’s performance under the lease. This is generally because most commercial property leases include, at the time of preparation, a commitment by the tenant, via an Authorised Guarantee Agreement (AGA) to guarantee the obligations of an assignee if the lease is assigned.
- The landlords consent to assignment is not automatic. Most commercial leases provide that the Landlord can withhold consent, although not unreasonably. What this means in practice can be the subject of dispute, but it usually means the landlord can insist on being satisfied that the tenant is financially solid.
- As a result of the above factors and others, in some cases, typically where the premises are desirable and other new tenants are also interested, an assignee (the person or company taking over the lease) may have to pay a premium to the outgoing tenant, may have to find a way to protect the outgoing tenant relating to the AGA. Conversely, if the proposed assignee holds the upper hand in negotiations a reverse premium may be negotiable, where the outgoing tenant pays the assignee a sum.
Licence to assign
If the Landlord agrees in principle to the lease being transferred there will usually be a formal licence to assign required. The Landlord will be likely to insist that it’s legal fees for this document are paid for by the other parties. The fees can typically be £1,000.00 or even more.
Lease assignment advice in London
Streathers are experienced in all aspects of commercial property, commercial leases and lease assignment. With 5 offices in London we are an excellent choice – convenient, cost effective and with local knowledge. Please get in touch for a discussion or quote.