Transferring A Lease

If you have a business tenancy and you are considering transferring the lease, your first step will be to ensure that the Lease contains provisions that will allow you to assign the lease. You should also check if there are any provisions for you to provide a guarantee. If this is the case, then when the lease is assigned, you will also need to sign an Authorised Guarantee Agreement, whereby you are providing the landlord with a guarantee, up to a certain period, that the new tenant will pay the rent and other outgoings. If the new tenant fails to do this, you will be liable to the landlord.

The next step will be to check with the landlord whether in principal, it will be happy with the proposed assignment. This is important, as you do not want to start off the legal process without knowing that the landlord will give the formal consent.

As soon as you have identified a prospective tenant, try to obtain as much information as possible and provide it to the landlord before the formal application for consent is made. Also, you will need to clarify all the terms of the assignment with the landlord at this stage. Some negotiating may be necessary in order to reach terms that you, the landlord and the prospective tenant are happy with.

To get the lease assignment process started, you will then need to instruct a commercial property solicitor and him/her with details of the landlord and its solicitors and the prospective tenant and its solicitors. You will also need to provide your solicitor with the Lease and any associated documents relating to the tenancy.

Difficult Landlords

If you have a difficult landlord, then you will need to be careful how you handle the situation, even though most standard clauses in the lease state that the landlord cannot withhold consent to an assignment unreasonably. The reason for being cautious is that the landlord could use delaying tactics, which could result in losing the prospective tenant!

It is therefore advisable to try and obtain consent to the transfer of lease from the landlord at an early stage, and then to start advertising and look for a new tenant. Contacting the landlord and engaging early will give you a feel of the landlord’s reaction.

If the landlord is not willing to negotiate, then consider holding a ‘without prejudice’ meeting attended by all parties, including the prospective tenant. Each party’s legal representatives should also be present where available, as the solicitor(s) can help guide the meeting and record the agreed terms to avoid any ambiguity later.

Court proceedings should always be considered as a last resort, and the court will want to see that the parties have attempted negotiations. Therefore, court proceedings should only be brought once the negotiations have reached some form of conclusion. A useful and often cheaper alternative would be to use formal dispute resolution.

Whether you use alternative dispute resolution or court proceedings, it is advisable that you ensure the prospective tenant is also involved and bound throughout all the negotiations, in order to ensure that the prospective tenant does not later decide to withdraw from the lease transfer.

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