Commercial landlord and tenant
Licence to assign
The landlord's formal consent to transfer a commercial lease, with the conditions, guarantees, deposits and costs that usually come with it.
This work depends on the details, so our team prepares a quote for you, usually within one working day.
Most commercial leases say the tenant cannot assign (transfer) the lease without the landlord's written consent. That consent is given in a licence to assign: a deed between the landlord, the outgoing tenant and the incoming tenant that records the permission and the conditions attached to it.
Landlords who have received a request to assign use this service, and so do tenants who need consent before a sale or move can go ahead. For a landlord, the licence protects the income by vetting the new tenant and securing guarantees. For a tenant, it is the document that unlocks the deal, so the aim is to get it agreed quickly and on reasonable terms.
The cost turns on the lease, the parties and the conditions sought, so we prepare an individual quote, generally within one working day. Say in your request whether you need the licence only or the whole assignment.
What is involved
A licence to assign normally goes through these stages:
- The application: the tenant applies in writing with details of the proposed assignee, its accounts, references and any guarantor, and offers an undertaking (a binding promise by its solicitor) to pay the landlord's reasonable costs.
- The landlord's assessment: the landlord, often with its managing agent, checks the assignee's financial strength and whether any conditions set out in the lease are met. A superior landlord or the landlord's lender may need to consent too.
- The decision: under the Landlord and Tenant Act 1988, the landlord must respond within a reasonable time, in writing, giving reasons for any refusal and listing any conditions.
- Drafting: the landlord's solicitor prepares the licence. It typically contains the consent, a direct promise by the assignee to the landlord to comply with the lease, any authorised guarantee agreement (under which the outgoing tenant guarantees the incoming one) and the arrangements for a rent deposit or guarantor.
- Negotiation: the tenants' solicitors comment on the conditions, the size of any deposit and the time allowed to complete the assignment.
- Completion: the licence is signed and dated, ideally at the same time as the assignment, and the landlord's costs are paid.
- Afterwards: the landlord receives notice of the assignment and updates its records, rent demands and insurance.
What the legal fee covers
- Reviewing the lease's alienation clause (the part dealing with assigning and subletting) and any preconditions
- Preparing or assessing the formal application for consent
- Drafting or reviewing the licence to assign
- Negotiating conditions such as guarantees and rent deposits
- Preparing the outgoing tenant's guarantee agreement, if one is required
- Liaising with a superior landlord or lender whose consent is needed
- Completing and dating the licence
Costs you may see on top
- The landlord's legal costs, normally paid by the outgoing tenant under an undertaking
- A managing agent's or surveyor's fee for assessing the application
- Fees charged by a superior landlord or lender for its own consent
- Any deposit the landlord asks the assignee to lodge as security
- A separate rent deposit deed or guarantee document
- Company or credit searches on the incoming tenant
What to have ready
- A copy of the lease and anything that varies it
- The proposed assignee's full name, company number and registered office
- Two or three years of the assignee's accounts, or a business plan if it is new
- Trade, bank or previous landlord references for the assignee
- Details of any proposed guarantor
- The target date for completing the assignment
How long it takes
Once the landlord has a complete application, a licence to assign is commonly agreed within 3 to 6 weeks. The 1988 Act requires the landlord to act within a reasonable time, which depends on the circumstances, so sending a full application at the start is what keeps things moving. Timescales stretch when accounts or references are missing, the conditions are disputed, a superior landlord or lender must also consent, or the undertaking for the landlord's costs has not been given.
Things to watch for
- Landlords: refusing or delaying unreasonably can expose you to a claim for damages under the 1988 Act. Base any refusal on clear, recorded reasons connected with the lease and the proposed tenant.
- Tenants: read the lease before applying. Many leases granted since 1996 list circumstances in which the landlord may refuse, or conditions it may impose, such as an authorised guarantee agreement or minimum accounts figures, and these are generally enforceable.
- Do not let the incoming tenant move in before the licence is completed. Occupation without consent is a breach the landlord can rely on, and it weakens the outgoing tenant's negotiating position.
- Check whether the licence lapses. Many licences end automatically if the assignment does not complete within a set period, so agree a realistic date.
- If the landlord asks for a large rent deposit, ask whether it can be reduced or returned after a period of good payment or once the tenant's accounts reach an agreed level.
Questions people ask
What is the difference between a licence to assign and the assignment itself?
The licence to assign is the landlord's permission, recorded in a deed. The assignment is the separate document that actually transfers the lease from the outgoing tenant to the incoming one. Both are usually completed on the same day, with the licence first. If you are buying or selling a lease, the lease assignment page covers the whole transfer.
Can a landlord insist on any conditions it likes?
No. Where the lease says consent cannot be unreasonably withheld, any conditions must be reasonable, and the 1988 Act puts the burden on the landlord to show that they are. Conditions written into a lease granted since 1996 are treated differently, because both sides agreed them at the start. A rent deposit or guarantor may well be reasonable where the incoming tenant is financially weaker than the outgoing one.
How long does a landlord have to respond?
The law says a reasonable time without setting a number of days. What is reasonable depends on the circumstances, such as how complete the application is and whether a lender or superior landlord must also consent. A landlord can fairly ask for missing information before deciding, but a complete, straightforward application should usually be dealt with in weeks rather than months.
Do I need a licence to sublet as well?
Subletting, where you keep the lease but grant a shorter lease of all or part of the premises to someone else, usually needs a separate licence to underlet. The lease often controls the rent and terms of any sublease and may require it to be contracted out of the 1954 Act. The process is similar, so mention it in your request if you need both.
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.