Consents and Sensibility

Are you a Tenant considering transferring your interest in a lease, such as assigning the lease or even sub-leasing to a third party?  Usually this will be if the property is no longer suitable, whether this is because the business is expanding and larger premises are needed, or even on the opposite end of the spectrum if business is struggling and there is a need to downsize.  Or maybe you are a Landlord who has received an application for consent from your Tenant and are unsure what to do next.  Whatever the situation may be, the first thing you should do is to carefully re-examine your lease to make sure that any action you intend to take complies with the terms of the lease, to avoid potential action being taken against you for breach of the lease. 

Nowadays, most leases contain a specific ‘Alienation’ clause which sets out the Landlord’s position on assigning or sub-leasing the property, whether in part or as a whole.  It is common for such a clause to state that an assignment or sub-lease will be permitted, but subject to the Landlord’s consent.  If consent is required from the Landlord, section 19 of the Landlord and Tenant Act 1927 adds the proviso that such consent is not to be unreasonably withheld.

In such a situation, in accordance with the Landlord and Tenant Act 1988 when a written application for consent is served on the Landlord by the Tenant, the Landlord is under a duty to:

  1. give consent (unless it is reasonable to withhold consent); and
  2. give consent within a reasonable time;

The issue of “reasonableness” is of course not easily definable, and in case of a dispute much will depend on the specific facts and circumstances, and the relationship between the Landlord and Tenant.  However, many leases now contain specific clauses setting out a list of conditions which must be met, otherwise the Landlord would be entitled to refuse consent.

Commonly, in the case of a proposed assignment these conditions will include the new assignee being of sufficient financial standing to be able to comply with the Tenant’s covenants in the lease, and/or a condition that the outgoing Tenant must enter into an Authorised Guarantee Agreement (AGA) effectively guaranteeing that the assignee will comply with the Tenant’s covenants in the lease.

In the case of a proposed sub-lease, the lease may contain conditions setting out what the sub-lease must contain such as the level of rent payable, the basis of any rent reviews and for the sub-lease to be excluded from the security of tenure provisions of the Landlord and Tenant Act 1954.

In terms of what is considered a “reasonable time” for the Landlord to give consent, again this will depend on the facts and the complexities of a transaction, but it is generally measured in terms of days or weeks, rather than months.

Whether you are a Landlord or a Tenant dealing with the issue of consent to transfer an interest in a lease, there could be a number of restrictions and conditions to carefully consider and you should therefore make sure that you first check the terms of the lease and, if required, take advice on your rights and obligations.

For more information please contact our Commercial Property Team on Freephone 0800 689 0831 or send any questions through to Forbes Solicitors via our online Contact Form. You can also contact solicitor Mohassan Mehmood on 0333 207 1161 or via email on Mohassan.Mehmood@forbessolicitors.co.uk

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