Commercial landlord and tenant
Assignment of commercial lease
Legal work to transfer an existing commercial lease to a new tenant, including landlord's consent, guarantee agreements, rent deposits and registration.
This work depends on the details, so our team prepares a quote for you, usually within one working day.
If the assignment is part of selling your business, tell your solicitor at the start. The lease transfer, the business sale and the licence from the landlord normally complete on the same day.
Assigning a lease means transferring it to a new tenant, who takes over the rest of the term, the rent and all the obligations. It is common when a business is sold, relocates or no longer needs its premises, and it can be quicker than negotiating a new lease, provided the existing terms suit the incoming business.
The work covers both the outgoing tenant (the assignor) and the incoming tenant (the assignee). The landlord almost always has to consent, usually through a formal licence to assign, and may ask for an authorised guarantee agreement or a rent deposit, so much of the work is about getting that consent on acceptable terms.
What the solicitor does depends on which side you are on and how responsive the landlord is, so this work is quoted individually by our team, usually within a working day of your request. Say whether you are the outgoing or the incoming tenant.
What is involved
The steps differ slightly for each side, but a typical assignment runs like this:
- Agreeing the deal: confirming what is being transferred, whether the lease alone or with fixtures, fittings or a business, and any premium (a price paid for the lease).
- Checking the lease: for the incoming tenant, the remaining term, rent review and break dates, repair obligations, service charge, permitted use and whether the lease has 1954 Act protection.
- Landlord's consent: the outgoing tenant's solicitor applies for the licence to assign and negotiates its conditions. This is usually the longest step.
- Guarantees and deposits: agreeing any authorised guarantee agreement (AGA), under which the outgoing tenant guarantees the incoming one, and any rent deposit or guarantor the incoming tenant must provide.
- Enquiries and searches: the incoming tenant asks about arrears, disputes, the condition of the premises and the service charge history, and orders local searches.
- The assignment deed: preparing the transfer, with indemnities (promises to cover each other's losses) and any agreed apportionments.
- Completion: completing the licence and the assignment on the same day, apportioning rent and service charge, and dealing with deposits on both sides.
- Afterwards: giving notice to the landlord, filing any land transaction return and registering the assignment at HM Land Registry where the lease is registered or has more than seven years left.
What the legal fee covers
- Reviewing the lease and its history for the incoming tenant
- Applying to the landlord for consent on the outgoing tenant's behalf
- Negotiating the licence to assign with the landlord's solicitor
- Explaining any authorised guarantee agreement or rent deposit
- Raising enquiries and reviewing searches for the assignee
- Drafting the deed of assignment or transfer
- Apportioning rent and service charge on completion
- Notice of the assignment to the landlord and registration where required
Costs you may see on top
- The landlord's legal and surveyor's costs for the licence, usually paid by the outgoing tenant
- A rent deposit from the incoming tenant, if the landlord requires one
- The registration fee where the lease is registered or must be
- SDLT or LTT on any premium paid for the lease
- VAT on the premium, if the outgoing tenant has opted to tax
- Any fee the lease sets for registering notice of the assignment with the landlord
- A survey of the premises for the incoming tenant
What to have ready
- The lease, plus any deeds of variation and earlier licences
- Contact details for the landlord or its managing agent
- The incoming tenant's company details, accounts and references
- Details of any guarantor for the incoming tenant
- The agreed price for the lease, fixtures, fittings or goodwill, if any
- Recent rent and service charge demands showing nothing is owed
- Any existing rent deposit deed
How long it takes
An assignment commonly takes 6 to 10 weeks, and the landlord's consent usually sets the pace. Once the landlord has a complete application, with accounts and references for the incoming tenant and an undertaking for its costs, the licence can often be agreed within a few weeks.
Delays tend to come from incomplete applications, disputes over rent deposits or guarantees, arrears or breaches that the landlord wants put right first, and a superior landlord or lender who must also consent. Sending a full application at the outset is the simplest way to save time.
Things to watch for
- Never complete the assignment before the licence. Assigning without consent is a breach of the lease, and for leases granted since 1996 it also means the outgoing tenant is not released from its obligations.
- An AGA keeps the outgoing tenant liable if the incoming tenant fails to pay, until the incoming tenant itself assigns with consent. Weigh this up before agreeing the price for a business sale.
- Incoming tenants take on the state of the premises. If the property is in disrepair, you could face a dilapidations claim (a claim for disrepair) at the end of the lease, so get a survey and negotiate the price if needed.
- For leases granted before 1996, the original tenant can remain liable for the whole term. To pursue a former tenant for rent or service charge, the landlord must serve notice within six months of the sum falling due.
- Check the remaining term and its protection. A lease with little time left, or one contracted out of the 1954 Act, may not give the incoming business the security it needs.
Questions people ask
What is an authorised guarantee agreement?
An authorised guarantee agreement, or AGA, is a promise by the outgoing tenant to the landlord that the incoming tenant will meet the lease obligations. For leases granted since 1996, the outgoing tenant is normally released when it assigns, but the landlord can require an AGA as a lawful condition of consent. The AGA ends when the incoming tenant itself assigns with consent.
Can the landlord refuse consent?
It depends on the lease. Most say consent cannot be unreasonably withheld, and many modern leases list conditions the landlord may impose. Under the Landlord and Tenant Act 1988, once the landlord receives a written application it must respond within a reasonable time, consent unless it is reasonable not to, and set out any conditions or reasons for refusal in writing. A landlord that delays or refuses unreasonably can be liable for the tenant's losses.
Who pays the landlord's costs?
Usually the outgoing tenant, because most leases require the tenant to pay the landlord's reasonable costs of dealing with an application for consent. The landlord's solicitor normally asks for an undertaking, a binding promise from your solicitor to pay, before starting work. Ask for an estimate, and agree as part of the deal whether the incoming tenant will contribute.
Is my rent deposit returned when I assign?
Usually, yes, but only once the assignment completes and any money owed to the landlord has been paid. The deposit deed sets out when it must be returned. The landlord will often ask the incoming tenant for its own deposit, so the two are normally dealt with together at completion.
Who does the work
Your matter is handled by a law firm regulated by the Solicitors Regulation Authority, the Council for Licensed Conveyancers or CILEx Regulation, or in Northern Ireland by a solicitor regulated by the Law Society of Northern Ireland. At the moment the law firms on our panel act for property in England and Wales, so for property in Northern Ireland we tell you whether a firm can act for you before we pass your details to anyone. The firm confirms who will work on your file, their experience and its terms before you instruct it. How we choose our firms.