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.
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.