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Consent to assign a commercial lease
As a tenant, you usually require your landlord’s consent to assign a commercial lease to another party.
If your lease does not restrict your ability to assign, it can be transferred to another party at any time. However, most leases contain restrictions, enabling the landlord to retain control over who you assign to and to check the new party can meet their lease obligations.
See also: Ending a Commercial Lease or Licence
Unreasonably withheld consent
Most commercial leases allow assignment if the landlord consents. Indeed, many go further, stating the landlord will not unreasonably withhold consent. But if your lease permits assignment with their consent, it’s implied by law that they cannot unreasonably withhold consent. And where consent is not to be unreasonably withheld, the law imposes the following statutory duties on your landlord:
- To consent, except where it is reasonable not to.
- To consent within a reasonable time.
- To give you written notice of their decision, including confirmation of any conditions or the reasons for their refusal.
- To pass on your application to anyone else whose consent is required under the lease, such as a superior landlord or mortgage lender.
What conditions can your landlord impose?
Typical conditions your landlord may expect on granting consent to assign include:
- An authorised guarantee agreement – requiring you to guarantee the assignee’s performance of the lease obligations.
- A separate guarantor of the new tenant – if, for example, their financial status concerns the landlord.
What are your options if consent is withheld?
The landlord may legitimately refuse consent if:
- monies are owed; or
- there is an unremedied material breach of lease; or
- if, in the landlord’s reasonable opinion, the assignee does not have sufficient financial standing to comply with the lease obligations; or
- any other reasonable circumstance.
In any of these cases, you can negotiate with your landlord to explore what steps you might take to make your request acceptable.
However, if you believe that your landlord has unreasonably withheld consent, you can apply to the Court for a declaration that you are entitled to proceed (and claim damages if appropriate).
The tenant can decide to assign without consent. If the landlord’s refusal was unreasonable the assignment would be lawful. However, if the refusal to consent was reasonable the tenant will be in breach of the lease and the landlord may be able to claim damages and/or forfeit the lease.
Tips for tenants applying for consent to assign
Before applying for your landlord’s consent to assign:
- Always review your lease terms to check whether your ability to assign is restricted.
- Make your request to the landlord promptly to avoid unnecessary delays.
- Ensure you serve any consent to assign application entirely in accordance with the lease terms or relevant legislation.
- When requesting consent, provide any supporting information or documents required under the lease terms.