Assigning a lease and rent reviews

[RICK]

Hello all,

The current tenant is in the process of trying to assign the lease on a commercial property to a third party, the rent is currently well below market rate. Primarily due to the landlords ill health and wanting to get involved in disputes at that point.

Can the landlord stipulate the property will be subject to a new rent in line with market rates while the lease is being assigned?

Also if the current tenant refused how much does a tribunal usually cost and are costs always split equally where the parties are not in agreement?

Thanks
Rick
PS POSTED THIS ON RENT FORUM - AND REPOSTED OVER TO COMMERCIAL PER MEMBER ADVISE

[Editor]

Your tenant is assigning the lease to another, so the lease transfers "as is" and you cannot unreasonably object or delay - do this at your peril as there could be damages involved.
However, you have a right to qualify the new tenant in financial (credit worthyness) and use grounds.
If you feel the rent is below market value then you need to look to your lease for rent review provisions.
At this stage it would seem sensible to carry out a rent review once the assignment is completed.

[Tax Accountant]

Most leases will provide for landlords consent not to be unreasonably withheld. So long as the new tenant is good for the rent and honouring the lease obligations, you will normally not be able to stop the assignment.

As far as the rent is concerned, you can only enforce this according to the lease agreement and not in-between rent review dates. You cannot use the assignment as an opportunity to get in on the act. However, you could see if the new tenant is agreeable to implement the new rent on the basis that you may extend the length of the lease and you may also agree to vary the use of the premises, subject to planning regulations.

Remember that if the new tenant assigns the lease to a third party in due course, the original tenant will phase out of the picture altogether, ie you can only go back to the immediate previous tenant for any rent arrears etc.

[SteveP]

The only thing I would add to this is that assignor may well be receiving a premium from the assignee if the rent really is significantly below market rates. So the new tenant may actually be paying more than you think.

Not that there is anything wrong in that, but it would influence the new tenants thinking if you wanted to discuss a new lease. Would you want a market rate lease if you had paid a cash premium for the benefit of a low rent?

[Tax Accountant]

One further point is that you could always try to buy back the existing lease from your tenant. As Steve has said above, the tenant may require you to pay him a premium. The advantage to the tenant of being released from the lease is that he would no longer be responsible for any subsequent breaches of the lease, eg, rent arrears by the new tenant and dilapidations etc when the lease expires.

If you manage to buy back the lease, you would then be free to look for and grant a new lease to any tenant at the current market rent.

Ramnik