The Practical Lawyer

Landlord and tenant – commercial

Consent to assign – require a deed?

Most leases prohibit assignment without L’s consent. But, as is well-known, it is very easy for L to inadvertently give consent. This is well illustrated by Alchemy [2008], where L’s solicitors sent an e-mail saying:

‘Please note that this correspondence does not constitute the provision of consent by our client. Such consent will only be provided on the completion and delivery of a formal licence executed as a deed. Please also note that our client reserves the right to change the form of the draft licence submitted herewith and to impose new conditions to the grant of their licence in light of any further information received in relation to this matter.’

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Sub-lease – less than passing rent?

Many leases contain a provision saying the rent in any sub-lease must be the greater of the open-market rent, or the passing rent under the existing lease. In practical terms, that will often make it virtually impossible for T to sub-let (since, in today’s market, market rents are likely to be considerably below the passing rent).

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Lease renewal – ‘any other reason’

LTA 1954 allows T to request a new tenancy from L. The grounds on which L can oppose the application is set out in s30(1):

failure to repair or maintain;

persistent late payment of rent;

other substantial breaches or for ‘any other reason connected with T’s use or management of the holding’;

L has offered reasonable alternative accommodation;

sub-tenancy of part where rent would be more if let as a whole;

L intends to demolish or reconstruct the premises; and

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Insolvency – deed of surrender

In an insolvency situation, L will often agree to a surrender, in which the insolvent T surrenders the property to L. That will then allow L to re-let the property (assuming he can find a T). But, the danger here is that L might inadvertently lose his entitlement to claim in the insolvency in respect of future rents and obligations.

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Leases – regearing negotiations

As a result of the recession, lease regearings and extensions are becoming increasingly popular.

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L’s consent – new company

When deciding to give consent to a proposed assignment by T, L is entitled to take into account all relevant circumstances, and that will include the financial strength of the proposed assignee. But, can L object because the proposed assignee is a newly incorporated company?

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Assignment – L’s consent

T can assign the lease unless there is a covenant in the lease prohibiting this, or requiring compliance with pre-conditions. If there is an absolute prohibition then that will be the end of the matter; there is no implied requirement to act reasonably, and L needs no reason for any refusal.

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Break clauses – reminders

A reminder of the ‘who, when, and how’ of break clauses:

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LTA 1954 – contracting out

L and T can agree that T will not have the security of tenure provisions that normally apply under LTA 1954. Prior to June 2004, it was necessary for L and T to get a consent order from the County Court; these days, L merely serves a warning notice and T responds by signing a statutory declaration.

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AGA – negotiation

The property downturn has seen a renewed focus on the detailed wording of AGAs. For instance, in a recent CA case the terms of the AGA limited the guarantor’s liability to the period during which the assignee was ‘bound by the tenant’s covenants of the lease’.

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