Licence to Assign or Alter Commercial Property

Most commercial leases contain provisions whereby the tenant needs to seek consent to assign their lease or to make alterations to the premises. The provision will usually be worded so that a Licence is first obtained from the Landlord in which the appropriate consent is provided. It is also important that the provision states that the consent cannot be unreasonably withheld or delayed.

Providing consent via a Licence allows the Landlord to obtain more information about the new tenant (assignee) or the proposed alterations, as details must be provided to the Landlord before the Licence can be drawn up. It also allows the Landlord to confirm certain conditions that must be observed by the Tenant before the appropriate Licence is drawn up.

Often Landlords communicate that they are happy to grant the consent in principle, subject to further conditions being imposed and that the consent will not therefore be granted until a full licence setting out all those conditions has been drawn up and signed by the parties. Most Tenants are happy with this and accept this as precisely what it says. However, there have been cases where the Tenant has taken this initial indication as consent itself. This happened in the case of Alchemy Estates Ltd v Astor & Anor [2008] EWHC 2675 (Ch), where the High Court followed the decision of the Court of Appeal and held that a consent given in principle was sufficient to bind the Landlord into the assignment of the lease sought by the Tenants.

A point of reassurance for Landlords is that in the Alchemy case the lease did not provide for any conditions to be imposed on any consent to assignment. It is therefore advisable that Landlords ensure that their Lease contains provisions that impose conditions will need to be met before consent is granted for an assignment or alteration.

To avoid the principle of implied acceptance put forward in Alchemy case, Landlords must also ensure that they clearly communicate to the Tenant that they will not give consent until a Licence to assign or alter with all relevant conditions is drafted and signed by all parties.

If you would like a Licence to Assign or Alter to be drawn up then please contact a member of our Commercial Property Department.

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