Overview of Month-to-Month Leases
Renting an apartment or office space is a common process for many people. Rental agreements can be for a fixed term or on a month-to-month basis. Explore the benefits and drawbacks of month-to-month leases to determine whether this lease agreement fits your needs.
A month-to-month office lease or apartment lease covers each month for occupying a leased space. Tenants can live in or use the leased space for each month the lease is continued. Some landlords rent space fully on a month-to-month basis whereas, other landlords will use a fixed lease, then rolling it over to a month-to-month lease to extend it, if desired.
Benefits of Month-to-Month Leasing
Those needing or wanting flexibility will benefit from a month-to-month lease. This type of lease can last indefinitely, or it can end when desired without penalty for breaking the lease. Some landlords prefer a month-to-month lease for tenants because it enables them to end the lease at a time when finding a new tenant will be easy. This is especially common for leases for student housing when landlords know they will be able to find new tenants quickly. Month-to-month leases also enable landlords to change lease terms like raising rent prices. Switching to a long-term lease is also possible if desired. Finding a fully furnished rental is common for month-to-month leases.
Drawbacks of Month-to-Month Leasing
The drawbacks of month-to-month leasing can be significant. With little notice, a tenant can opt to move, making it necessary to fill it quickly to continue cash flow. A landlord can also abruptly decide to end the lease agreement with a tenant, forcing the tenant to move with little warning. Short-term tenants may not be of the same quality as longer-term tenants, causing potential problems with timely payments and following rules. Month-to-month leasing is usually costlier for tenants with rents being as much as 50 percent higher.
Signing the Lease
All leases must be in writing and signed by all parties to make them legally binding. Never sign a blank lease agreement. After signing a lease, get a copy. Lease hold-over clauses to continue a fixed term lease as a month-to-month lease don’t require new signatures after the fixed term concludes. It isn’t necessary to sign a new month-to-month lease in this situation because the monthly lease is a term of the already signed lease.
Giving Notice to Vacate
With a month-to-month lease, either party must provide a 30-day written notice of intent to vacate. The landlord can also raise the rent after providing the tenant with 30 days’ notice of the new rent price in writing.
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Assignment of Lease
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What is an Assignment of Lease?
The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.
You can view an example of a lease assignment here .
How Lease Assignment Works
In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.
However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.
Difference Between Assignment of Lease and Subletting
A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.
The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.
A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.
Here are some key differences between subletting and assigning a lease:
- Under a sublease, the original lease agreement still remains in place.
- The original tenant retains all responsibilities under a sublease agreement.
- A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
- Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
- Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
- The third-party in a sublease agreement does not have a direct relationship with the landlord.
- The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.
Here is more on an assignment of lease here .
Parties Involved in Lease Assignment
There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.
For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.
You can read more on lease agreements here .
Image via Pexels by RODNAE
Assignment of Lease From Seller to Buyer
In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.
The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.
You can read more on buyer-seller lease assignments here .
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I am a corporate attorney with offices in Rock Hill, SC, and Lavonia, GA. My practice is focused on contracts, tax, and asset protection planning. I act as a fractional outside general counsel to over 20 businesses in 6 countries. When not practicing law, I can usually be found training my bird dogs.
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David Alexander advises clients on complex real estate transactions, including the acquisition, disposition, construction, financing and leasing of shopping centers, office buildings and industrial buildings throughout the U.S. An experienced real estate attorney, David reviews, drafts and negotiates all manner of retail, office and industrial real estate agreements, including purchase and sale agreements, construction contracts, leases and financing documentation.
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What is an Assignment of a lease?
14 feb -->what is an assignment of a lease.
When you buy or are granted a lease, you take ownership and possession of the property for a fixed period of time, which is known as the term of the lease. You might take a ten-year lease, knowing that you might only want the property for a few years, and then want to move on as your business grows, but the landlord won’t grant a lease for a shorter period. This might not put you off taking the lease, as you can sell the remainder of the lease on, under certain criteria. This is known as assigning a lease , and we’ve set out below more detail of how this works.
So, in legal terms, the assignment of a lease is a process whereby all rights that have previously been possessed over a property are transferred from one party to another. It’s not unlike selling a house, but there’s a bit more paperwork involved! In particular, the outgoing lessee, the new lessee, and the landlord will all need to enter into a document known as a licence to assign .
There are various requirements that need to be satisfied before the current lessee can be released from the lease and the obligations under the lease are transferred to the new lessee under the Licence. The lease will usually set out what the Landlord’s criteria is before an assignment is possible, but we’ve set out below the most common requirements.
What criteria must be met?
Most of the time this would require similar checks to the ones carried out on the original tenant when the lease was first granted. These might include
- Financial checks. The landlord will want to know that the new tenant is going to be able to pay the rent. If not, they may ask for personal guarantees, or make the outgoing tenant continue to have some liability.
- Although a landlord’s main requirement is that their tenants can pay the rent, they may also want to know that they are complaint people , not likely to break the terms of the lease, cause a disturbance or upset other tenants. The landlord may, for example, ask for references from a previous landlord as to the tenant’s good character.
- Restrictions on activity. The landlord may restrict what business a new tenant can engage in. For example, if the landlord is a shopping centre, and the outgoing tenant sells men’s’ clothes, they’ll probably have no objection in the new tenant selling men’s clothes, but they might object to the premises being taken over by a business selling women’s clothes, if they feel they already have enough tenants in that line of business. Or they might only want tenants who sell high-end products.
Duties placed on the Landlord
Most modern leases will include a requirement that any consents required by the landlord must not be unreasonably withheld or delayed. If the tenant requests a licence to assign a lease, which the landlord either refuses without good reason, or takes a very long time to consent to, the tenant can take action, such as going to court for a declaration that the landlord is in breach of the lease. However this is a very major step to take, and we’d always encourage clients to do everything they can to reach an agreement without court action being necessary.
Not all leases will include an express provision requiring the landlord to give consent fairly and promptly. If that’s the case, it can be much harder and possibly more expensive but never impossible to do an assignment.
Can a landlord object to the assignment of a lease?
As we’ve set out above, if the lease includes a provision that consent to an assignment should not be unreasonable refused or delayed, any landlord who fails to comply is in breach of lease. This could result not just in court action but costs and possibly damages to the tenant.
However, it should be remembered that the right to assign the lease is generally subject to permission of the landlord being granted. So, a tenant should not assign the lease to a new party until a licence to assign has been properly executed. If he does, the landlord could apply for an injunction to prevent the letting, which could end with the tenant having to pay costs and damages to the landlord. Alternatively, the landlord could seek forfeiture of the lease , which could have far more significant consequences for the tenant.
When will it be sufficiently reasonable for a landlord to withhold consent?
Although this will always depend on the circumstances of the lease, here are some guidelines as to the types of situation when a landlord may be justified in refusing to agree to an assignment of a lease:
- Insufficient information supplied in respect of the new tenant. This would mean that the Landlord is unable to make a judgment on the proposed tenant. It will usually be for the tenants (old and new) to satisfy the landlord that the new tenant is a good fit.
- Character and financial standing of the assignee
- The landlord has decided that the future viability of the building as a whole could be at risk, such as if he feels the new tenant would damage the reputation of the area or be detrimental to other tenants
When will it be sufficiently unreasonable for a landlord to withhold consent?
Again, this will depend on the facts of the case, but generally, it is likely to be held to be unreasonable for a landlord to withhold consent on the following grounds
- Issues that are not covered by the lease. So, for example, if the lease doesn’t require a new tenant to prove that they are of good standing, it might be unreasonable for the landlord to try to imply this into the assignment process.
- The landlord makes an argument that the tenant will have a lasting effect on the lettings of the other properties in the vicinity , except other properties owned by the landlord.
- The landlord wants repossession of the property.
- The landlord wants to withhold consent on the grounds of race, sex or disability . So if the outgoing tenant’s target audience was heterosexual men, but the incoming tenant’s target audience is homosexual men, this alone is unlikely to be a good enough reason.
Assigning a Sub-lease
A sub-lease is where a tenant has sublet the property or part of it to a third party. Sometimes that third party may want to assign the sub-lease to a new tenant. If so, not only will the landlord’ consent be required, but also that of the tenant who granted the sub-lease.
Knowing the difference between assigned lease and a sublease
Knowing the difference between an assigned lease and a sublease could help you make the right decision when choosing which route to take. Although both achieve the same result, an assignment of a lease is distinctively different to a sub-lease.
An assignment of a lease is a complete transfer of the right to be the tenant under the lease. The third-party (or new tenant) becomes the “tenant” under the lease, taking over all of the leased premises, substituting for the old tenant. The new tenant, therefore, pays the rent due under the lease directly to the landlord and is responsible for all aspects of complying with the lease.
As we have explained above, a sub-lease is an entirely new lease between the tenant and a third party as sublessee for the premises or sometimes for a part of the premises. The original lease between the tenant and the landlord remains in place and is unaffected by the sub-lease. This results in the original tenant remaining liable for all the obligations of the original lease, whilst collecting rent from the subtenant.
If you own a lease and you are considering selling it, or you’re thinking about buying an existing lease, then hopefully this will give you enough information to consider your options, but we’d be very happy to talk to you about this further before you make any final decisions.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.
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Assignments of Business Leases
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Knowledge Hub for Growth
Assigning a commercial property lease to another business.
In order to grow or react to market conditions your business may need to quickly leave its current premises. If your business rents the premises but there is still time left to run on the lease, what can you do?
A common solution is to transfer your lease to someone else. This process is called ‘assigning a lease’. In this article, we describe how this process operates and what potential problems you may need to overcome. If you need help in this area, our friendly commercial property experts can help.
Traps for the Unwary
How to assign a lease.
‘Assigning’ a lease simply means transferring your lease to another person so that they become the new tenant. Once the assignment has taken place the lease continues to exist and the new tenant becomes liable for all of the tenant’s obligations in the lease.
The first step is to find someone who may want to take over the lease (they are known as ‘the assignee’). Aside from being happy with the rent that is being charged, the assignee will want to review the lease to ensure that it does not contain any onerous or unacceptable terms. This process will be very similar to the one your solicitor carried out when you negotiated the lease in the first place, except that as the assignee will be taking over the existing lease they will have little or no opportunity to change its terms and will therefore have to be happy with it as it stands.
If the lease contains terms which are generally unacceptable in commercial property leases or specifically adversely affect the ability of the new tenant to use the property as they wish, you may have problems in assigning the property. It is therefore worth knowing before you start marketing your lease just what it does or does not allow. For example, it is no good marketing a warehouse to factory owners if it specifically forbids industrial use.
In addition, most tenants will want to carry out the same due diligence process as if it were purchasing a commercial property or negotiating the lease at outset. This usually involves raising queries with the local authority and utility companies as well as finding out about environmental and similar issues. This takes time so do not expect to be able to transfer the lease instantly.
The second step, once an assignee is found and they are happy to take on the lease, is to actually transfer (‘assign’) the lease. Generally this will be done using a Land Registry form known as a TR1 . If the lease is for less than 7 years, then the lease can be assigned by using a deed of assignment. Both these documents have the same effect and will generally be executed by both you as the current tenant and the assignee.
In theory, you can assign your lease to whoever and whenever you like. However, most landlords are not willing to allow the tenant such freedom and therefore write into the lease restrictions on to whom a lease can be assigned and on what basis. In most cases, the landlord will be required to consent to the assignment before it can go ahead. This is where most of the practical problems arise as we explore in more detail below.
When and why to assign a lease
A tenant will generally look to assign its lease when it no longer requires use of the property but there is still some time before the lease comes to an end. For example, your business may have taken a five-year lease, but after two years you need to move. Unless the lease includes break clauses , you would have to continue to pay the rents and comply with the lease terms for the remaining three years of the lease term. By assigning the lease you can dispose or at the very least reduce that liability.
If there is less than a year remaining of the lease to run, it may be more difficult to find someone who wants to take the lease for a short period of time, so in those circumstances it may be worth continuing to trade from the existing property until the lease comes to an end itself.
A few common examples of why you may wish to assign your lease are that:
- You may have agreed to sell your business and the structure of the transaction requires the lease to be assigned to the purchasers;
- Your business may not be trading as well as hoped and you are unable to keep up with rent payments or you may simply need smaller premises;
- You may find that the property is no longer situated in a convenient place and may wish therefore to relocate the business; or
- Your business may have grown faster than anticipated and requires bigger premises from which to trade.
Is a licence to assign needed?
Most landlords are primarily concerned with the income they earn from the properties they rent out. It is important to them that the tenants they rent to:
- Are able to pay the rent in full and on time;
- Keep the property in a good state of repair so that the property can be easily relet when the tenant leaves; and
- Behave in such a way as not to adversely affect the landlord’s ability to rent other properties it may own nearby.
It is for this reason that most landlords will seek to control who you can assign your lease to and prevent you from assigning your lease without your landlord’s consent.
Whether your landlord’s consent to an assignment (by way of a licence to assign) is required depends on the terms of the lease you are seeking to assign. Most leases will have some restrictions. It is only if the lease does not include any restriction on assignment, or includes restrictions but no requirement to obtain the landlord’s consent to an assignment, that no licence to assign will be required.
Although the detailed provisions can look intimidating, most assignment clauses simply require the landlord to agree that it believes the assignee to be able to meet its obligations and if it does so to formally consent to the assignment. The landlord is also usually required by statute not to unreasonably withhold or delay giving that consent. A licence to assign is the document used to evidence that the landlord has granted its consent to an assignment as required.
Note: if you feel your landlord is not co-operating, you should explore the options for tenants in our article on landlords unreasonably withholding consent .
You should ask for the landlord’s consent as soon as possible so as not to delay matters, as the landlord only has to deal with your request within a reasonable time and even then only once you have provided all the information the landlord needs in order to reach its decision on whether or not to give its consent. This may evidence of your assignee’s good standing such as bank and previous landlord references, and copies of audited accounts and bank statements.
If your proposed assignee is not of sufficient standing to satisfy the landlord consent may be granted if the assignee agrees to provide a guarantor for its liabilities or a rent deposit that can then be used if it fails to pay. What the landlord is permitted to insist on will depend on the specific wording of the lease and the specific set of circumstances.
You should also be aware that most landlords will insist that whatever the financial state of the assignee, you, as the outgoing tenant, will be required to guarantee the assignee’s obligations under the lease by what is called an authorised guarantee agreement. You should not make the error of assuming that by assigning your lease you can just walk away from any responsibility. The one thing that the law requires you to is to find someone who can pay the rent and comply with the lease terms. If you do not do this, then the landlord will most probably be able to recover any arrears from you.
If your lease expressly prohibits assignments without containing a requirement for consent to be given by the Landlord, then the starting point is that you cannot assign it at all. However, the landlord may still agree to an assignment taking place. This would still be documented by way of a licence to assign but in this case, the landlord would be under no obligation to grant its consent even if it would be reasonable to do so or to act promptly when considering your request to give that consent.
Actual assignments and virtual assignments
Most transfers of the ownership of a lease are carried out by an ‘actual assignment’ where the tenant assigns its interest in the lease to an assignee as explained above.
In a few cases you may seek to use a virtual assignment whereby you remain liable under the terms of the lease, but enter into a contract with a third-party transferring the economic benefits and burdens of the lease, without actually assigning the lease itself. These can be used when the lease contains overly restrictive assignment clauses. You could, for example, declare a trust or enter into a contract in favour of a third-party, effectively transferring the economic benefits and burdens of the lease to them. However, beware of clauses in the lease which prevent this sort of arrangement.
If a tenant is a company and the shares in that company are transferred to someone else, then the lease would remain unaffected and the tenant would still be the company. Although not strictly a virtual assignment this change of ownership can be a concern to some landlords and as a result, some leases include express provisions restricting changes in the shareholding of the tenant company. However, they are unusual and arguably onerous.
Registering an assignment
If the lease is registered at the Land Registry or has more than 7 years of its term remaining, and you are the assignee, you must register the assignment at the Land Registry. The Land Registry will then process the application and update the title register for the lease so that it is in your name.
It is very important that the assignee does indeed register the lease as, until it does, the assignment is not fully complete and legally you have not yet become the tenant. This has practical implications as, depending on the wording of the lease, you may not be able to serve a valid break notice until it is registered at the Land Registry. As registration can in some circumstances take a long time, you may find yourself unable to end the lease when you expected. If you forget to register you are unlikely to complete your registration in time to take the steps you need to take.
If you do not apply for registration within 2 months of the date of completion of the lease, the lease becomes void and can only be registered is the Land Registrar agrees to make an order extending the 2 month period.
In addition to registering the lease with the Land Registry most leases include an obligation to notify the landlord that an assignment has taken place and to send them a copy of the assignment document and pay them a fee for noting the transaction. Sometimes the lease sets out the specific notice fee, but more often than not the lease merely sets out a minimum fee. In theat case, you should ask the landlord to confirm the notice fee before completing the assignment.
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The effect of an assignment on a lease
In most cases, once a lease has been assigned, the assignee steps into the shoes of the tenant and all the rights and duties that the previous tenant had pass over to the new tenant. Occasionally there are rights in the lease which are personal to the original tenant. Again, this often affects the break clause. If the right to end the lease early is personal to the original tenant, you cannot do so if the lease is assigned. In such circumstances it may be better to sublet the property rather than assign the lease itself.
As most leases require the previous tenant to guarantee the performance of the new tenant, the assignment also has the effect of rearranging the liabilities for payment of the rent. Any previous guarantor under an authorised guarantee agreement will have been automatically released by the assignment and rent deposits may become repayable by the landlord.
Assignment v sub-letting
Is it preferable to assign a lease or sub-let it (retain your lease but grant a lease of the property for a slightly shorter term to another party)? The answer very much depends on your specific requirements and the particular circumstances.
Assigning the lease means that you no longer have any interest in the property. It is quite common that a tenant will still remain ‘on the hook’ for the lease obligations after an assignment, as the landlord will likely have insisted that they enter into an authorised guarantee agreement to guarantee the assignee complies with the lease. However, a landlord will not always insist on an authorised guarantee agreement and, even if one is in place, the obligations on it cease if/when the assignee assigns the lease itself to another party. Therefore, most tenants regard an assignment as the best option where they have no current use or interest in the property and do not think they will do at any point in the future.
As already noted you may have to keep the lease in your name if you wish to rely on any personal rights in the lease by granting a sub-lease. This will allow you to retain your interest in the lease, but it also means that you are still liable to pay the rents due under the lease and comply with all of the lease obligations. As the sub-tenant is likely to be in occupation of all or part of the property, you must manage them to ensure that the sub-tenant does not place you in breach of your duties under the lease.
Other reasons for sub-letting include:
- Using the sub-lease as an income stream.
- If you think you may wish to use the property later.
- If you want to dispose of only part of the property and keep the rest for your own use (most landlords are extremely unlikely to allow you to assign part only of your lease).
Transfer of the landlord’s interest in the building
Only a tenant can assign the lease. If the landlord wishes to dispose of its interest in the lease it does so by selling the freehold interest in the building to a new party who then automatically becomes the landlord. Subject to your receiving proper notification you are then required to pay the rent to the new building owner. If you intend to serve a notice (e.g. bringing the lease to an end or requesting a new lease) make sure that you serve the title on the legal owner otherwise you may find your notice to be of no effect. Beware the registration gap mentioned above. You may think that your apparent landlord is the legal owner but legally he may not be.
In addition to the points set out above that relate to the terms of the lease, there are other issues which can cause difficulties when trying to assign it. These include:
- In any circumstance where the landlord is required to consent to a transaction, make sure that all your rent and similar payments are up to date as often leases state that no consent will be given if payments are outstanding.
- The Minimum Energy Efficiency Standards (MEES) Regulations mean that you cannot assign your lease (or sublet it) if the Energy Performance Certificate (EPC) (most likely provided by your landlord when you took the lease) has expired. You cannot even market the property without providing an EPC.
- While they may not actually prevent an assignment, breaches of health and safety law or fire safety regulations or the rules around monitoring and managing asbestos may cause delays or scare your assignee away. If compliance with the rules is your responsibility under the lease, your landlord may refuse to consent to the assignment until you do so.
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An assignment of a commercial lease is a process by which the current tenant of a leased commercial property transfers its leasehold rights to a new tenant.
The new tenant takes over the obligations and responsibilities of the lease, including paying rent and maintaining the property during the remaining lease term. The assignment process involves various legal and administrative steps, including obtaining the landlord’s consent and preparing and executing a lease assignment agreement.
Do you need help with the assignment of a commercial lease? Call our fixed-fee commercial property solicitors on 020 3417 3700 or fill in the enquiry form .
Our commercial lease solicitor in Wembley, London will help you to understand the rights & obligations of all parties involved in the lease assignment process. We can provide guidance and ensure that the process is conducted correctly.
No matter where your commercial property is, our commercial lease solicitors provide legal services regarding the assignment of commercial leases throughout England and Wales.
Table of Contents
What is an assignment of a lease?
5 things you should know about lease assignments, what is the process of assigning a lease in the uk, what is the difference between assignment and transfer of lease, do you need a solicitor to assign a lease, how much do solicitors charge for the assignment of the lease.
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Frequently Asked Questions
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An assignment of a lease is a legal process that allows the original tenant (assignor) to transfer their rights and obligations under the lease agreement to a new tenant (assignee).
When a lease is assigned, the assignee effectively takes over the remaining term of the lease and assumes all the responsibilities and liabilities outlined in the original lease agreement. The assignor is usually released from their obligations, but this depends on the terms negotiated with the landlord.
Here are a few key points to understand about lease assignments in the UK:
- Legal Documentation
- Leasehold Covenants
- Landlord's Rights
Lease assignments typically require the consent of the landlord or the freeholder, as most lease agreements have clauses that restrict or regulate assignments. The landlord may have specific criteria or conditions for approving an assignment.
2. Legal Documentation
To complete an assignment of a lease, the assignor and assignee must typically enter into a legal agreement known as a Deed of Assignment. This document outlines the terms of the transfer and ensures that all parties involved are aware of their rights and obligations.
3. Leasehold Covenants
The assignee is bound by the original lease's covenants, which are the terms and conditions that govern the lease. These may include payment of rent, maintenance responsibilities, restrictions on use, and other obligations.
While the assignor is usually released from future obligations, it is important to note that they may still be liable for any breaches of the lease agreement that occurred before the assignment.
5. Landlord's Rights
The landlord typically retains the right to review and approve the proposed assignee, ensuring they are financially capable and suitable to take over the lease. The landlord may also have the power to request reasonable fees or costs associated with reviewing and processing the assignment.
The process of assigning a lease in the UK typically involves the following steps:
- Review the Lease Agreement
- Obtain Landlord's Consent
- Negotiate Terms
- Deed of Assignment
- Land Registry Notification
- Completion and Handover
1. Review the Lease Agreement
The assignor (current tenant) should review the existing lease agreement to understand the terms and conditions associated with the lease assignment. It is important to check for any clauses or restrictions on assignments and seek legal advice.
2. Obtain Landlord's Consent
The assignor must seek the landlord's consent to assign the lease. This usually involves making a formal request in writing by providing details of the proposed assignee and their financial standing. The landlord may request additional information or documents as part of their assessment process.
3. Negotiate Terms
The assignor and assignee negotiate the terms of the assignment, including any financial arrangements and responsibilities. This may include agreeing on rent apportionment, security deposits, and any other relevant terms. Legal professionals can assist in ensuring that the negotiation process is fair and comprehensive.
4. Deed of Assignment
Once the terms are agreed upon, a Deed of Assignment is drafted. This document outlines the specifics of the lease assignment, including the names & details of the parties involved, the property address, the assignment effective date, and any additional terms or conditions. The Deed of Assignment must be signed by both the assignor and assignee in the presence of witnesses.
5. Land Registry Notification
After the Deed of Assignment is signed, it is typically submitted to the Land Registry. This ensures that the assignment is officially recorded and that the assignee's interest in the property is registered.
6. Completion and Handover
Upon completion of the assignment, the assignee assumes all rights and obligations under the lease. This includes paying rent, fulfilling maintenance responsibilities, and adhering to any other lease terms. The assignor is typically released from future liabilities, subject to the terms negotiated with the landlord.
Throughout the process, it is advisable for both parties to seek legal advice to ensure that their interests are protected and that all necessary legal requirements are met. Additionally, consulting with the landlord or a property professional can help navigate any specific requirements or conditions set by the landlord regarding lease assignments.
The assignment involves transferring the rights and obligations of the lease from one party (the assignor) to another party (the assignee). The assignor is typically the current tenant, while the assignee becomes the new tenant.
On the other hand, a lease transfer refers to transferring the leasehold interest from the current tenant (transferor) to a new tenant (transferee). In a lease transfer, the existing tenant is completely replaced by the new tenant.
It is crucial to consult with legal professionals, such as solicitors or commercial property specialists when dealing with lease assignments in the UK. They can provide guidance and ensure that the process is conducted correctly, protecting the interests of all parties involved.
At Wembley Solicitors, we offer affordable legal services regarding the assignment of a commercial lease on a fixed fee basis with no hidden costs or nasty financial surprises.
Our commercial property solicitors in London charge a fixed fee between £1000-£1500 (Plus VAT) for complete services regarding the assignment of a lease.
Why choose Wembley Solicitors for the assignment of a commercial lease?
- We have extensive knowledge and experience in drafting commercial leases and assignments of leases.
- Our commercial lease solicitors provide legal services on a fixed fee basis without blowing your budget and with no hidden costs.
- We provide professional legal advice and assistance at every step and keep you updated as your matter progresses.
- We provide legal services remotely throughout England and Wales. You do not need to physically attend our office.
- We have a team of qualified and accredited solicitors.
- We are authorised and regulated by the Solicitors Regulation Authority (SRA), so you know you are in safe hands.
We provide legal advice and services to both landlords and tenants. Call our property solicitor today at 020 3417 3700 for more information about the services.
Who pays lease assignment fees?
The responsibility for paying lease assignment fees can vary depending on various factors, including the terms negotiated between the parties involved and any legal or contractual provisions.
Usually, the current tenant (the assignor) and the new tenant (the assignee) bear their own legal costs.
How long does it take to assign a commercial lease?
In general, the assignment of the lease process takes around 3-4 weeks. However, it could take anywhere from a few weeks to several months, depending on how complex the lease is and how long it takes to obtain the landlord's consent.
The amount of time it takes to assign a commercial lease in the UK can vary depending on several factors, including the agreement between the parties, the complexity of the lease and the involvement of third parties, such as solicitors and landlords.
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Do you need legal advice or assistance with a commercial property lease? Our expert property solicitors are ready to help you. We're authorised and regulated by the Solicitors Regulation Authority (SRA), so you know you're in safe hands.
Contact our solicitor today to get legal advice and assistance with your legal matters. You can call us on 02034173700 or leave your details here for a callback request regarding your legal matter.
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Assignment of commercial lease with landlord consent — How to guide
updated September 1, 2023 · 11min read
Occasionally, tenants want to leave a rental property before the end of their lease. Individuals may take new jobs in new cities, and companies may go out of business or sell their enterprise to a third party. Whatever the reason, tenants can transfer their lease interests to new parties by completing an assignment of the lease.
An assignment is the transfer of one party’s entire interest in and obligations under a lease to another party. The new tenant takes on the lease responsibilities, including rent and property maintenance, and the original tenant is released from most (if not all) of its duties.
Successful property management begins with good documentation, and a properly-drafted and executed assignment will ensure that all parties – new and old – understand the obligations that are being transferred and the responsibilities that each will have under the new arrangement. In every way, this lays the foundation for a great (and long-lasting) landlord/new tenant relationship.
2. Dos & don’ts checklist
- An assignment is the complete transfer of one party’s interest in an agreement to a third party. In this case, the original tenant is giving all of his or her interest to a new tenant. That new tenant steps into the shoes of your old tenant, and your old tenant is released from most of his or her obligations under the lease (although this can be changed by agreement). This is not the same as a sublease. Under a sublease, a third party is granted only those specific rights provided in the sublease. The original tenant still remains ultimately liable for residual obligations under the lease, or any failures of the new tenant to meet his or her obligations. This means that the original tenant will be responsible (in equal measure with the new tenant) for any skipped rent payments or damage to the property.
- Be sure the Assignee gets a copy of the original lease. He or she will be bound by its terms, and should know what his or her new obligations and rights are. A copy should be attached to the Assignment as Exhibit A.
- The original tenant cannot assign more rights than it has under the original lease. For example, if the term of the lease is 1 year, the term of the assignment cannot be 2 years.
- Most leases will require the landlord’s written consent before an assignment becomes effective. Review the original lease agreement for additional information, and to see if there are other requirements that must be met to make the transfer valid.
- Although a landlord is not required to consent to a lease assignment, in some cases your lease will state that a landlord’s consent will not be “unreasonably” withheld. This is more common in commercial leases. What is considered unreasonable varies from jurisdiction to jurisdiction and you should review the laws in your area (and the language in your original lease agreement) for additional information. On the other hand, if the lease states that the landlord may use his or her “sole discretion” to evaluate the new tenant, he or she can veto this assignment without any reason.
- Depending on your jurisdiction or the terms of your original lease, a landlord’s failure to respond to your request for consent to assignment within a certain time may itself be deemed consent. In some cases, it may give a tenant grounds to terminate the lease. Review the original lease and your state’s laws for additional details.
- A landlord may consider only proper factors when deciding whether or not to consent to an assignment. Some criteria will be considered impermissible by courts (e.g., refusal is based on race or sex of the proposed new tenant). If your landlord does not consent to your attempted assignment, make sure he or she gives you clear written reasons for the decision. Failure to provide such reasons can itself be deemed unreasonable.
- Sign three copies of the assignment, one for you, the other party, and the landlord.
- Depending on the nature of its terms, you may decide to have the document witnessed or notarized. This will limit later challenges to the validity of a party’s signature.
- State laws governing real estate, renting, leasing, and assignments vary widely, and can have a tremendous effect on your arrangement. In some cases, specific information must be included in the assignment and in others, language must be excluded form your agreement. Review your state and local laws for additional information about what is required in your area.
- If your agreement is complicated, do not use the enclosed form. Contact an attorney to help you draft a document that will meet your specific needs.
3. Assignment of commercial lease (with landlord consent) instructions
The following provision-by-provision instructions will help you understand the terms of your assignment. The numbers below (e.g., Section 1, Section 2, etc.) correspond to provisions in the form. Please review the entire document before starting your step-by-step process.
- Introduction. Identifies the document as an assignment of lease. Write in the date on which the assignment will become effective (often the date on which it is signed). Identify the parties and, if applicable, what type of organization(s) they are. Note that each party is given a name (e.g., “Assignor”) that will be used throughout the agreement. The current tenant is called the “Assignor,” because he or she is the person who is assigning the interest. The new tenant is called the “Assignee.”
- Recitals. The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. In this Assignment, the recitals include a simple statement of the parties’ intent to assign the Assignor’s interest in the Lease and the Assignee’s intent to assume it. Provide a brief description of the property being rented, and the name of the landlord under the Lease. Attach a copy of the Lease to the Assignment as Exhibit A. Describe the property that is being assigned. You don’t need to include a full legal description, but provide enough information so it can be clearly identified. For individual houses, the address will usually be sufficient. If the property has a specific name (e.g., “Lincoln Towers”), include that as well. If only a section of the Premises is being assigned, make that clear in this description.
- Section 1: Assignment. The Assignor’s assignment of its right and interest in the Lease to the Assignee. This paragraph allows you to determine whether all of the Assignor’s interest in the Lease is being assigned, or only part of it. For example, if interest in only one half of the Premises is being assigned, this should be clearly noted in the space provided. Delete the bracketed phrase that does not apply to your arrangement.
- Section 2: Assumption of rights and duties. Provides that the Assignor is no longer responsible for the duties listed under the Lease (e.g., rent, maintenance of property, etc.). There are two options provided regarding the continuing liability of the Assignor. In the first, the Assignor is completely released from any liability it had under the Lease. If the Assignee defaults, for example, the Landlord cannot seek payment from the Assignor. In the second, the Assignor will be liable to the Landlord if the Assignee defaults. Select the option that best suits your arrangement, and delete the other. Note that, in any event, the Assignor will remain responsible for any obligations that occurred before the assignment. In other words, if damage happened to the apartment before the transfer, or if the Assignor did not fulfill another obligation under the Lease, the Assignor remains responsible.
- Section 3: Reimbursement. In many rental relationships, amounts are paid in advance or deposited as security for the landlord. At the end of the lease, this money (with deductions subtracted or interest added) is returned to the tenant. If a lease interest is assigned, the lease does not end and the assigning party cannot get this money back. This paragraph requires the Assignee to pay those amounts to the Assignor, and any later return of that money by the Landlord will be made to the Assignee.
- Section 4: Indemnification. The Assignee’s promise to bear the financial cost of any injury the Assignor suffers as a result of its assignment, and any lawsuits that may arise from its activities on the Premises. Note that there is an exception carved out for things done by the Assignor before the Effective Date of the Assignment – the Assignor remains responsible for those actions.
- Section 5: Continuing effectiveness of lease. Emphasizes that except for the assignment, the original terms of the Lease are still effective.
- Section 6: Assignor’s representations and warranties. Lists the Assignor’s promises under the Assignment. Note that this is not a detailed list of services to be provided. Rather, this is the Assignor’s assurance that the Lease and the rental interest it’s providing is useful (i.e., no one else lives or has an interest in the place, the lease is still in effect, the Assignor is not behind in rental payments, etc.). If there are additional representations you think the Assignor should be making, feel free to include those here.
- Section 7: Condition of premises. Notes that the Premises are not being warranted to be perfect or useful in a particular way. Rather, the Assignee is taking the rented property for what it is, and is accepting it in that state.
- (Optional) Section 8: Additional terms of assignment. An optional provision allowing the Assignor and the Assignee to include any representations, warranties, or other provisions particular to their situation. If you remove this section, correct the section numbers and the references in the document.
- Section 9: Interpretation. Provides that both Parties were on equal footing in the negotiation of the consent to assignment. In many cases, contracts are interpreted in favor of the individual who did not draft it. This clause makes clear that both Parties were involved in the drafting, and so the document should not be read in favor of (or against) either.
- Section 10: Notice. Lists the addresses to which all official or legal correspondence should be delivered. Write in a mailing address for both the Assignor and the Assignee.
- Section 11: Modification. Indicates that any changes to the document are ineffective unless they are made in writing and signed by both Parties.
- Section 12: Governing law. Allows the parties to choose the state laws that will be used to interpret the document. Note that this is not a venue provision. The included language will not impact where a potential claim can be brought. Write in the applicable state law in the blanks provided. The governing law will almost always be that of the place where the apartment or rental building is located. It’s generally a bad idea to attempt to use a different location.
- Section 13: Counterparts/electronic signatures. The title of this provision sounds complicated, but it is simple to explain: it says that even if the Parties sign the Assignment in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city — much less the same room — this provision ensures that business can be transacted efficiently, without sacrificing the validity of the agreement as a whole.
- Section 14: Entire agreement. The Parties’ agreement that the document they’re signing is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a Party from arguing that other enforceable promises exist, but it will provide you some protection from these claims.
- Landlord’s consent [and release]. Review the terms of the original lease agreement to determine whether or not the Landlord’s consent is required to make the assignment effective. This is usually the case. If so, have the Landlord sign the document in the space provided. Note that there are two options provided at the end of the consent. You may choose only one of these and should delete the one that you do not use. The first option corresponds to the brackets in Section 2 of the Assignment. If the Assignor will remain responsible under the Lease, even after the Assignment, include this first bracketed language in the consent. For example, if the Assignee doesn’t make rent payments, the Landlord will be able to get these payments from the Assignor. Delete the phrase “and Release” from the title of this paragraph if you choose this option. If the Assignor will not be responsible under the Lease, select the second bracketed phrase, which releases the Assignor from any remaining liability. In other words, the Landlord cannot look to the Assignor for damages or rental payments if the Assignee doesn’t perform any of its obligations under the Lease. If you include this clause, you can keep the bracketed language in the title of the paragraph (i.e., the title will be “Landlord’s Consent and Release”).
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