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Article:
The Right to Pass on or Sell a
Leasehold Interest
One of the fundamental principles of
a leasehold, which gives an interest or estate in land and
property, is the fact that the leasehold interest can
be owned and sold or passed on (assigned) to another
leaseholder.
This right to assign is generally subject
to the permission of the landlord, which cannot be
unreasonably withheld.
The lease will normally stipulate
that any assignee must meet certain criteria and be
qualified as a reliable tenant by the landlord.
This would require similar financial
checks and references to which the existing tenant
(assignor) was subjected to on taking on the original
tenancy.
Landlord's
Duties with regard to Assignment
Assignment of commercial tenancies
is now regulated under the Landlord and Tenant Act 1988
which imposes certain duties in this regard on the
landlord:
- to give consent to an assignment,
except where it is reasonable not to do so
- to give written consent without
undue delay
- If the landlord also requires the
consent of a superior landlord, to take reasonable
steps to secure consent without undue delay.
When
it is not Reasonable to withhold Consent
It is generally not reasonable to
withhold consent on matters outside the lease and the
landlord-tenant relationship or if:
- the landlord argues that the
tenant will affect the letting of other properties in
the vicinity.
- Similarly with the letting of
other parts of the building of which the said letting
forms a part only.
- The landlord wants re-possession
- The landlord wishes to withhold
consent on race, sex or disability grounds.
When
it is Reasonable to withhold Consent
However, if the landlord withholds
consent on the grounds of a proposed use, it may be
held to be reasonable, even if this use was not excluded
in the lease.
Reasons a landlord may justifiably
give for refusal to assign include:
- Insufficient information supplied
on or by the proposed tenant to make a judgement
- Character and financial standing
of the assignee,
- Landlord's judgement that the
future viability of the building as a whole could be jeopardised.
When
the Parties Cannot Agree
If a tenant feels he can justify a
claim that the landlord is unreasonably withholding
consent she has the option of carrying on with the
assignment transaction but risks forfeiture of the
lease.
Alternatively the tenant could apply
to the court for a judgement, putting up with the
subsequent delay.
On-going Liabilities Under some
circumstances the original tenant may continue to have
ongoing liabilities in respect of an assigned lease. For
example if the original lease was entered into before
the 1st of January 1996, or if guarantees have been
given at the time of assignment. This would apply where,
for example, the new tenant runs up rent arrears.
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