If you are a tenant and you need to exit your current lease arrangements one answer to this would be assign the lease to another willing tenant. If you are able to find someone willing to take over as tenant of the property, you can apply to your landlord for their agreement to an assignment.
The first thing you would need to do would be to check your lease to ensure that assignments are permitted. Most leases will allow assignment with the landlord’s prior written consent.
In some cases a landlord can refuse to give their consent to the assignment. For example, if the new tenant intends to use the property for a different use to that specified in the lease, if new tenant’s references aren’t good enough or for financial reasons.
Although an assignment of the lease is a solution to freeing a tenant from their current lease, it should be noted that the tenant’s liabilities are unlikely to end on assignment. The landlord is likely to require any outgoing tenant to guarantee the liabilities of an incoming tenant.
If the lease is dated pre 1996 then the landlord can look to any former tenant to be liable for a breach by the new tenant. Even if the lease has been assigned several times since it was first assigned, the landlord can still pursue the original tenant for breaches by a new tenant.
If the lease is dated post 1996 an outgoing tenant will be required to give what is called an Authorised Guarantee Agreement (“AGA”) in respect of the new tenant.
An outgoing tenant’s liability under an AGA will come to an end when the immediate successor assigns the lease to another tenant. This is more favourable than the pre-1996 position where a landlord could pursue any of the previous tenants for a breach by the current tenant.
An AGA is a special form of guarantee created by the Landlord and Tenant (Covenants) Act 1995 and is usually a condition of a landlord giving their consent to the assignment of a lease.
Details of the landlord’s requirements for an AGA will usually be contained within the original lease. This will then be documented in the landlord’s agreement to assign which is typically given by way of a deed known as a licence to assign.
The AGA will require that an outgoing tenant guarantees the performance of the obligations in the lease by the incoming tenant. If the incoming tenant breaches an obligation in the lease, the landlord can look to the outgoing tenant to make good that breach.
Most AGAs will last until the incoming tenant in turn assigns the lease to a new tenant. If the incoming tenant does not assign, then the outgoing tenant will remain liable until the expiry of the lease.
In certain limited circumstances the AGA can be discharged before the usual expiry date. The actions of a landlord can sometimes result in the discharge of an AGA, for example where there is a material variation of a lease without the guarantor being a party to it.
If you are thinking of assigning your lease or you are a landlord and your tenant wishes to assign, please ensure you obtain legal advice. The information provided above is only a brief outline of the obligations on a tenant that wishes to assign their lease and is not intended to be legal advice. Contact Ramsdens Commercial Property Team by calling 01484 821 500 or email jane.holroyd@ramsdens.co.uk.