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Article Index
Getting out of a Lease
Why Go?
Your Basic Choices
Your Lease
Terminating the Lease
Assigning the Lease
Sub-letting Your Premises
Finding a Tenant
Market Conditions
Your Negotiating Position
Avoiding Disputes
What Will It Cost?
Page 6 of 12

Getting out of a Lease

5. Assigning the Lease

5.1 Assigning a lease (passing it on to another business) is a half-way step between terminating the lease and sub-letting.

  • Short leases often prohibit assignment of the lease. It may also be prohibited in the last few years of a lease. Even if assignment is permitted, the lease will restrict who the new tenant can be.
  • You are likely to need the landlord's consent, but the landlord cannot unreasonably withhold consent.The key issue is whether the financial standing (covenant) of the new tenant is as good as yours. The landlord will usually want to check the prospective tenant's accounts and references.
  • The permitted use of the premises may be restricted in a way that disqualifies the proposed new tenant.The landlord will want to know how the new tenant will use the premises, and to be told of any planned alterations.

5.2 Although the new tenant (assignee) is liable to the landlord to fulfil the terms of the lease, you may be left with some liabilities.

One way or another, you usually guarantee the new tenant's payments.

It is usually the date of the lease that matters.

  • For leases beginning before 1 January 1996, you usually remain liable to the landlord for all payments owed by any subsequent tenants, throughout the full period of the lease. (This is the infamous 'Privity of Contract' law.)If you obtain your premises by taking an assignment of a pre-1996 lease, you are bound under the pre-1996 law.
  • For leases beginning after 1 January 1996, the landlord will usually be entitled to require you to guarantee payments by the next tenant (but not all subsequent tenants), failing which the landlord may be entitled to refuse to let you assign the lease.
BHP Infosolutions

Labels: Premises, Reduce Costs
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