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What is a Licence to Assign?

If you are a tenant in a commercial lease and are looking for ways to extricate yourself from the contract, you might want to consider whether you have the license to assign.

A licence to assign is when there is a clause within the contract that states you are allowed to sell – or ‘assign’ – the remainder of the lease on to a third party. If you wish to do this, you must obtain permission – a licence – from the landlord or management company.

Before granting a licence, it is very likely the landlord will want to run certain checks on the proposed buyer to ascertain their financial stability, and obtain references to ensure their suitability. If everything is found to be acceptable and the landlord consents, you may proceed with the sale, freeing yourself from the lease.

However, when assigning a lease, there are a few things to be wary of:

  • You will be responsible for paying the costs incurred by your landlord, including their legal fees and the expense of carrying out reference checks.
  • Our landlord may state that you, as the seller, must act as a guarantor for the buyer. So if the new tenant does not meet his or her first payment, you will have to provide the money. Thus you will not be completely free of liability.
  • The landlord is within his or her rights to withhold a licence to assign, if there are reasonable grounds to do so. This might include the proposed tenant not being financially viable.
  • If you do not have express permission from your landlord and you do assign the lease, you will be in breach of the lease.

Therefore, assigning a lease may sound simple, but it can be a complex legal issue that requires careful planning and execution. That is why it is important to have expert legal advice on your side.

A commercial property solicitor from our team can suggest whether you are able to assign a lease. If your application is unreasonably refused by your landlord, we can help you fight this decision, using our expertise to argue your case. If you are given a licence to assign, we will prepare all the paperwork for you, making sure your position is fully protected and negotiating any terms that could be deemed unfavourable for you.

For more information about this article or any aspect of our commercial property legal services, please call us on 01772 424999 or email enquiries@solicitordirect.com or why not book an appointment. We will be delighted to help you and remember we do not charge you for initial advice.

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