MAKE YOUR FREE Licence to assign

A licence to assign is an agreement between a landlord and a tenant where the tenant wants to assign or transfer their obligations under a lease to another party (known as the assignee).

If you are a landlord of a commercial property and your tenant wants to assign, or transfer their obligations under the lease to another commercial tenant, use this licence to assign template to formally give them your consent to do so. 

For use in England and Wales only.

Use this licence to assign:

• when your tenant has approached you for consent to assign the lease of a commercial property to another business
• when the original lease includes a clause preventing the tenant from assigning without your consent
• when you have seen the assignee's financial accounts and they are in a position to pay the rent and other sums due under the lease
• when the assignee will use the property for a purpose allowed under the original lease

This licence to assign covers:

• providing a commercial tenant with consent to assign
• an optional requirement that the tenant will guarantee the rent and sums due under the lease
• a time limit for completion of the lease assignment
• the landlord's registration fee

You will need to use a licence to assign if you have a lease and it doesn't allow the tenant to transfer the lease to a new tenant without obtaining the landlord's consent first. This licence to assign is suitable if the lease was originally granted on or after 1 January 1996 and does not contain a clause stating that it is an 'old' tenancy for the purposes of Landlord and Tenant (Covenants) Act 1995.

If the lease absolutely prohibits assignment, then the landlord can refuse consent without giving a reason. If it prevents assignment without the landlord's consent the landlord must have a good reason for refusing. Refusal is likely to be justified only if the assignee:

1. cannot show that it has the financial strength to pay the rent and other sums under the lease or to meet the cost of repairs and other tenant obligations; or

2. intends to use the property for a purpose not allowed by the lease (eg using a shop as a fast food outlet or restaurant). Commercial landlords often require the assignee to show three years' accounts demonstrating after-tax profits at least three times the level of the rent due under the lease or provide a director's, parent company, or bank guarantee. Where there is a legitimate doubt over the assignee's financial strength, the landlord may insist that the current tenant guarantees the assignee's ability to meet all tenant obligations under the lease.

There is no prescribed form for a tenant's application for consent to assign, so the request may have been made verbally, by letter or by email.

If the date is known, the licence will include the date the tenant first made a request to the landlord for its consent to the assignment. If no date is known, the licence will just state that a request was made.

The landlord can set a time limit for completion of the assignment and is entitled to insist that the assignment takes place within a reasonable period after the date of references of the assignee were provided.

If the assignment has not been completed within the agreed time period, the tenant will no longer have permission to assign the lease and the tenant will need to re-apply for permission.

A landlord can charge the tenant to register an assignment, fees of £25 or £50 are common.

Ask a lawyer for:

• original leases that do not allow the tenant to assign
• an assignee that you do not agree with has the ability to pay the rent under the lease
• an assignee whose use of the property is different to the use allowed under the original lease