Assigning a business lease

This is best shown by way of the following example. The landlord owns commercial premises and his tenant is leasing the premises for twelve years. In year six, the tenant decides to close his business and no longer wants the premises.

The tenant needs to transfer or assign to another business the rest of the term of years left on the lease, otherwise he’ll have to pay the rent for another six years. The tenant needs permission to assign the lease and this is given by way of a Licence to assign signed by the landlord, the out-going tenant and the in-coming tenant.

Note you’ll then need a deed of assignment to actually implement the transfer of the lease.

Get details of the proposed new tenant. Ask for references, such as bank details, trade and get professional and character references.

Consider asking for additional security, such as a guarantee or a deposit under a Rent deposit deed. This is a sum of money held as added security for the payment of rent and performance of obligations under the lease.

In Scotland, where the assignment is accepted by the landlord, the out-going tenant will no longer have any responsibilities under the lease. All liability, both past and future, will transfer to the in-coming tenant. Generally, it would be unreasonable for a landlord in Scotland to request any guarantee if the in-coming tenant can show he can pay the rent and meet the other obligations in the lease.

The new tenant may also wish to alter the premises to suit his own business.  A Licence to alter and also a Licence to change use of the premises may also be required. A Licence to change use of the premises may be subject to planning consent.

Check the lease to ensure that there isn’t an absolute prohibition on assignment. Also check to ensure that all covenants in the lease have been complied with.

Do you need additional security, such as rent deposit, guarantor or bank guarantee?

Is the assignment conditional on anything?

Is a change of use proposed and will a Licence to change use be required?

Do you need an assignment of goodwill?

Do you need a Licence to alter?