Assignment of commercial lease

Most leases of commercial buildings give the tenant the right to sell the lease but this right is usually conditional upon having the consent of the landlord. In most cases the landlord has to give consent unless it would be unreasonably not to do so.  This means that there are two distinct documents required to effect an an assignment of a  lease. The first document is the assignment - this is the document which passes ownership of the lease from the seller to the buyer. The second  document is the 'Licence to Assign' - this is the document which the landlord enters into in order to give consent to the assignment.

All leases are different and the terms of each need to be looked at in order to assess exactly what requirements there may be in connection with an assignment. The section to look at in a lease is often referred to as 'alienation'. Our templates though will provide the basics of what will be required.

When deciding whether or not to give consent to an assignment of the lease, the landlord will have particular regard to the expected ability of the party taking the lease to pay the rent. If the landlord is uncertain about that then he may require that a guarantor also sign. Legaldocsdirect provides versions of the licence to assign either with or without a guarantor clause

The Landlord and Tenants (Covenants Act ) 1995 which came into force on 1st January 1996 changed the liability that tenants had under a lease. A tenant who signed a lease before this date was generally caught by 'privity of contract' which meant that the original tenant remained liable under the terms of the lease for the whole duration of it. This meant that a Landlord could go back to the original tenant to obtain payment of rent arrears which had accrued long after that tenant had sold the lease. This does not apply to leases entered into after that date.

Leases entered into after 1st January 1996 usually contain provisions which enable the landlord to call upon the outgoing tenant to sign an authorised guarantee agreement. This is an agreement whereby the outgoing tenant guarantees the performance of the incoming tenant. This applies for one assignment only i.e. if the lease is assigned again then the liability under the authorised guarantee agreement ends automatically

If the lease has a registered title then the form of assignment is not appropriate - instead use Land Registry form TR1. It is likely to have a registered title only if the lease was originally granted before 13th October 2003 and was for a term of more than 21 years, or after13th October 2003 and was for a term of more than 7 years. If the lease is unregistered but there is more than 7 years remaining on the lease then remember that it will need to be registered at HM Land Registry -in this case you can use either our form of assignment or a Land Registry TR1

The assignee (purchaser) will need to submit a Land Transaction return (form SDLT1) to the Inland Revenue following completion of the assignment. There will only be Stamp Duty Land Tax to pay if the price paid for the assignment is more than £150,000 (assuming the property is not residential) - but even when there is no duty to pay a return generally has to be sent in  -see http://www.hmrc.gov.uk/so for more information

If further security is required against performance of the tenants obligations then the landlord may wish to consider taking a rent deposit - click here for more information

We hope that you will find our templates helpful. Beware though - leases are substantial and often complex documents. If you have any doubts you should consult a solicitor

Assignment of Lease	£25
Licence to Assign Lease	£25
Licence to Assign Lease including guarantee provisions	£25
Authorised Guarantee Agreement	£25

The documents will download as a Zip file. Once downloaded it will unzip to a Word document. You will need a zip utility to unzip the document Windows XP contains a built in utility. Alternatively shareware versions suitable for unzipping a file can be obtained from the Internet - for example, click the Winzip button at the side of this page.

The documents available on this site have been prepared for use in England & Wales. They may not be valid if used in other areas.