How to Assign or Transfer a Commercial Lease?

To assign or transfer a commercial lease, start by reviewing your lease, then get landlord consent, and prepare legal documents like the Deed of Assignment.

Assigning or transferring a commercial lease can be complex, especially for tenants relocating or business owners selling. This guide outlines the process and highlights the importance of a commercial lease solicitor.

Do you need help with the assignment of a commercial lease? Call our fixed-fee commercial property solicitors on 020 3417 3700 or fill in the enquiry form.

Table of Contents

What Is a Commercial Lease Assignment?

A commercial lease assignment lets a tenant transfer their lease rights to another. The new tenant takes over the old tenant's duties, including rent and property maintenance.

This is different from subletting, where the original tenant stays involved but lets someone else use the property. In an assignment, the original tenant usually has no role left once the transfer is done (unless agreed in the lease or a legal document).

When Might You Need to Assign a Commercial Lease?

You might need to transfer or assign your commercial lease in several situations:

• Relocating to a new property: Your business might grow too big for the current space or find a better location.
• Selling your business: If you're selling a business that operates from the premises, the buyer will need to take over the lease.
• Financial difficulties: You might want to assign the lease to another tenant to lessen your financial burden.

Change in business structure: Mergers, acquisitions, or restructuring might mean a new entity needs to take over the lease.

What is the Process for Assigning or Transferring a Commercial Lease?

1. Review the Lease Agreement

First, check your lease agreement carefully. Most commercial leases have terms about assignment and transfer. These terms explain when you can transfer the lease. Some leases need landlord approval, while others might not allow it at all.

Look for important terms like:

• Landlord consent requirements.
• Authorised Guarantee Agreement (AGA): In some cases, the outgoing tenant (assignor) might need to guarantee the new tenant's (assignee) lease obligations.
• Costs associated with the assignment, such as legal fees.

2. Obtain Landlord Consent

Most commercial leases require landlord consent for any assignment. To ask for this, you need to send a Request for Consent letter to the landlord. This letter should include details about the new tenant (assignee), like:

• The nature of their business.
• Financial references (such as credit checks or bank statements).
• References from previous landlords.

The landlord can decide if the new tenant is right for them. They might say no if the new tenant doesn't meet their standards. But they must be fair when making this decision.

3. Prepare the Required Legal Documents

To finish a commercial lease assignment, you'll need a few documents, including:

• Heads of Terms: A summary of the main terms agreed upon by the assignor, assignee, and landlord.
• Licence to Assign: This document confirms the landlord's consent to the lease transfer. It's signed by the landlord, the current tenant (assignor), and the new tenant (assignee).
• Deed of Assignment: This legal document officially transfers the lease from the assignor to the assignee. For registered leases, a TR1 form is used, and you must submit Form AP1 to the Land Registry to complete the assignment.
• Authorised Guarantee Agreement (AGA) (if required): The outgoing tenant might need to guarantee the new tenant's obligations, providing extra security for the landlord.

4. Completion of the Transfer

After all parties have signed the necessary documents, the lease assignment is complete. The new tenant takes on all the lease's rights and duties, including rent, maintenance, and following the lease terms.

5. Notify Interested Parties

After the transfer, tell everyone who needs to know. This includes subtenants, service providers, and utility companies. You might also need to tell the local tax authorities about the change.

Can You Change the Terms of a Commercial Lease During Its Term?

Yes, both parties can agree to change the lease. This is done with a Deed of Variation. It proves the agreed changes and prevents future disputes.

What Documents are Needed to Assign a Lease?

For a lease assignment, you'll need several documents. These ensure everything is done legally:

• Heads of Terms for Assignment of Lease
• Tenant’s Request for Consent to Assign a Lease
• Licence to Assign Heads of Terms
• Deed of Assignment of Unregistered Lease
• Deed of Assignment of Registered Lease (TR1)
• Form AP1 (Application to Register Assignment of Lease)
• Notice of Assignment of Lease

What is a TR1 Form for Lease Assignment?

A Deed of Assignment of Registered Lease (TR1) is used by the Land Registry. It officially transfers the lease from the current tenant to the new one.

Can a Commercial Lease Be Assigned Without a Deed?

No, you need a deed of assignment to make it legal. This document shows who is responsible for the lease. Without it, the deal isn't official, and you could be stuck with the lease.

How Long Does the Assignment Process Take?

The time to assign a commercial lease typically ranges from a few weeks to a few months, depending on the lease complexity, landlord's approval, and new tenant checks.

Who is Responsible for Paying the Costs of a Commercial Lease Assignment?

Usually, the new tenant (assignee) pays the landlord's legal fees. But they might share costs based on the agreed terms.

Who Pays for the Lease Assignment?

Usually, the incoming tenant (assignee) pays for the legal fees. But you can talk about splitting these costs. Make sure to discuss this early on.

Post-Assignment: Are You Still Liable as the Outgoing Tenant?

After the assignment, the new tenant (assignee) takes over. They are responsible for rent and all tenant duties, including repairs and maintenance.

At times, the landlord might ask you to stay liable. This is through an Authorised Guarantee Agreement (AGA). If the new tenant doesn't pay or breaks the lease, you could be responsible. Always check with your solicitor before agreeing to anything.

Can a Landlord Terminate a Commercial Lease Agreement?

Yes, a landlord can end the lease early. This is often due to unpaid rent or lease term breaches. They can do this through forfeiture if the lease allows it.

What is the Difference Between Assignment and Transfer of Lease?

The assignment involves transferring the rights and obligations of the lease from one party (the assignor) to another party (the assignee). The assignor is typically the current tenant, while the assignee becomes the new tenant.

On the other hand, a lease transfer refers to transferring the leasehold interest from the current tenant (transferor) to a new tenant (transferee). In a lease transfer, the existing tenant is completely replaced by the new tenant.

The Importance of Consulting a Commercial Lease Solicitor

Hiring a commercial lease solicitor is highly recommended. They can:

• Review and negotiate the lease terms.
• Ensure compliance with legal requirements.
• Handle all documentation.
• Protect your interests during the assignment.

Not getting legal advice can lead to big problems. You might miss important details or face disputes later.

Why Choose Wembley Solicitors for the Assignment of a Commercial Lease?

• We have extensive knowledge and experience in drafting commercial leases and assignments of leases.
• Our commercial lease solicitors provide legal services on a fixed fee basis without blowing your budget and with no hidden costs.
• We provide professional legal advice and assistance at every step and keep you updated as your matter progresses.
• We provide legal services remotely throughout England and Wales. You do not need to physically attend our office.
• We have a team of qualified and accredited solicitors.
• We are authorised and regulated by the Solicitors Regulation Authority (SRA), so you know you are in safe hands.

We provide legal advice and services to both landlords and tenants. Call our property solicitor today at 020 3417 3700 for more information about the services.

How Much Do Solicitors Charge for the Assignment of the Lease?

At Wembley Solicitors, we offer affordable legal services regarding the assignment of a commercial lease on a fixed fee basis with no hidden costs or nasty financial surprises.

Our commercial property solicitors in London charge a fixed fee between £1000-£1500 (Plus VAT) for complete services regarding the assignment of a lease.

Contact a Commercial Lease Solicitor

Get in touch with our expert commercial lease solicitors in London by calling 020 3417 3700 or emailing us at info@wembleysolicitors.com.