Assigning a lease – why time matters

23-03-2022


It is common now for commercial leases to allow a tenant to assign – transfer – a lease to a third party.  To do so, the lease will often prescribe certain conditions that need to be satisfied and will require the formal written consent of the landlord which cannot be unreasonably withheld.

If a tenant wants to assign their lease then it must first make formal application for consent in accordance with the terms of the lease.  Unless and until the application is made to the landlord in such form, the application process will not be considered to have commenced.  A tenant must therefore read the lease carefully to make sure it has applied in the correct way, to the correct person and supplied all and any information that is required about the proposed assignment and the prospective assignee.

Once that application has been properly made, the Landlord must respond within a reasonable time period. If a Landlord fails to respond within such a time period then this constitutes an unreasonable withholding of consent under The Landlord and Tenant Act 1988 and is a breach of the landlord’s statutory duty.

A refusal of consent without proper reason and a failure to provide written notice of the decision to the tenant is also a breach of the lease. Case law expands on this in explaining that a landlord cannot later justify a refusal of consent based on matters not raised with the tenant prior to the expiry of the reasonable period.

In these circumstances the tenant may then assign the lease without the landlord’s consent.

Landlords must therefore act with care and promptly on receiving such applications from their tenants.

There is no specific definition of what a reasonable time frame is and it will be based on the circumstances of each case. This will take into consideration any factors already known to the landlord or tenant at the time of the application, any further information the landlord requires and whether the tenant communicates any urgency. However, a reasonable time frame should be measured in days or weeks, as opposed to months.

For example, a tenant who requires consent to assign their lease has been discussing the possibility with their landlord for weeks prior to finding a potential assignee and officially making the written request to the landlord. In this situation the landlord will not be entitled to the same amount of time to respond as if it was a surprise request because they already had knowledge of the tenant’s intentions.

The next step will be for the Landlords solicitor to draft the formal licence to assign and any other documents the lease requires. This process will usually take a few weeks (given that there are no complications) and the tenant may be required to pay for this and any other reasonable costs incurred by the Landlords solicitor. Once completed, the tenant will have the right to assign but it is important to bear in mind that the licence might cease to be valid if the tenant has not assigned the lease within a certain time frame.

It therefore is important for all parties to a lease assignment to keep an eye on the time throughout the process as it can have significant effects– whether that is a tenant being able to assign the lease without the landlords consent or missing out on their right to assign if they don’t move quick enough.

For more information on how our specialist Real Estate team can assist you and your business with commercial leases click here.

 


Karron Whitter

Partner
Commercial Property

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