A significant number of commercial leases, whether for retail shops, offices, warehouses or industrial units are let on long leases, often with a 10 year term or more.

As circumstances change, tenants often decide to move and in such circumstances they do not want to remain liable for the rent and other outgoings for a lease of commercial property they no longer want or need. The potential solution to this issue is to seek to find a replacement tenant for the remaining term of the lease. In legal terms this is known as assignment.

Lease assignment is rarely straightforward, not least because a lease can rarely be assigned without the Landlord’s consent. A further complication is that the new potential tenant, known legally as the assignee, will likely be wary about the risks of taking on an existing contract.

Particular areas of concern are likely to be :

• potential liability for dilapidations at the end of the term,
• the position on ability to renew the lease
• the general condition of the building and any alterations made to the premises by the existing tenant (known as the assignor) looking to assign.
• The position on future rent review

Consequently, in addition to the usual types of checks, searches and enquiries which a solicitor for a tenant will make, there may be additional negotiations whereby the assignee will seek assurances and protections from the assignor.

If you need a solicitor for advice on or to deal with assigning a lease, we are an ideal choice especially if you are in London. We advise landlords, tenants and clients interested in taking on an existing lease. Please do get in contact to discuss or to get a quote.

Lease assignment is not necessarily the only option available to a tenant looking to exit from a lease of commercial property. Other possibilities to look at commonly include :

• Many long leases have break clauses – if there is a possibility of exercising the break clause in the near future, this may be worth looking at as a clean exit.
• If the current tenant is in financial difficulties it may be possible to negotiate a surrender of the lease with the landlord on the basis that the landlord may accept that he/she/it may get no further payments if the tenant is insolvent. A surrender may also be possible if a prospective new tenant is not prepared to take an assignment and is insisting on the grant to he/she/they/it of a new long lease.

Landlord consent for lease assignment

In general contract law, unless assignment of a contract is expressly prohibited or limited, assignment can take place without the other party’s consent.

With commercial property leases, the vast majority do contain a restriction on assignment. This is generally on the basis that assignment is only permitted with the Landlord’s consent, with such consent not to unreasonably withheld. The practical implication of this is that most Landlords will want to assure themselves of the potential assignees financial and other suitability and their general business reputation.

The requirement to obtain Landlord consent will inherently add some cost and delay to the transaction. A licence to assign will be needed, which will need to be paid for by either the assignor or assignee (or shared between them).