Commercial lease lawyers discuss how to transfer a commercial lease
The legal procedure for commercial lease transfer isn’t the same as selling a residential leasehold to someone else; you will need to speak to your landlord, who can impose some restrictions, plus there will be additional documentation you will need to complete. Our commercial lease solicitor explains.
Am I able to action a commercial lease transfer?
Many commercial leases are transferrable, but there will usually be certain restrictions on assigning your lease which dictate how you can transfer your lease. You will need to check the terms of your lease first to understand what the requirements are. Before your commercial lease transfer you will almost always need consent from your landlord. If you do not have their consent, not only could you still mistakenly be held liable for the rent and the property’s maintenance, but your landlord could make a claim against you for breaching the terms of your lease. Take advice from a commercial lease lawyer before you make the transfer.
Can my landlord refuse to transfer my commercial lease?
According to the Landlord and Tenant Act 1988, a landlord cannot deny your request to transfer your commercial lease without “reasonable” grounds, unless there is an alienation clause in the lease. They must also respond in writing to your request within a reasonable time period. However, they can choose to grant consent subject to certain conditions – for example, they may insist that the new tenant obtains a guarantor. They may also request additional information regarding the new lessee before they grant or refuse consent.
What are “reasonable grounds” for refusal?
Unfortunately, there is no short answer to this question. If your landlord has refused to let you assign your commercial lease, we advise that you speak to a commercial lease solicitor. Some examples in which the landlord could reasonably refuse include:
Our expert commercial lease solicitors can help you understand why you were denied consent to assign and challenge them if their refusal is unreasonable.
Can I sub-let my commercial premises?
You will almost always need your landlord’s consent before you can sub-let your commercial premises, but you may be able to. In general, you’re more likely to be given consent if it would be easy to divide the pre-existing premises into separate sections. There may also be certain stipulations set out in your lease which you will need to check before you begin subletting. For example, your lease could impose restrictions regarding subletting part of your property or outright prohibit you from subletting your property full stop.
What is the process for a commercial lease transfer?
Firstly, you should send a Request for Consent to assign your commercial lease to your landlord. In this letter, you should include information about the proposed new tenant, such as the services the company provides and a reference from a previous landlord. Assuming your landlord gives consent, you will then normally sign an “authorised guarantee agreement” with your landlord. This is a guarantee from you that the new tenant will abide by the covenants of the lease, and also places a potential liability on you if the new tenant does not comply by these rules. The landlord will then sign a Licence to assign which grants you consent to transfer your lease. Usually, you will then need to create a deed of transfer/assignment which explains the obligations of both yourself and your new tenant following the transfer.
What should the new tenant do?
The new tenant – the assignee – will often need to submit previous trade references, landlord references, bank references and an accountant reference to your landlord. This is to provide the landlord some reassurance that the assignee can be trusted to reliably pay the rent and adhere to the lease’s covenants. If the assignee fails to provide these documents when requested, this will likely constitute reasonable grounds for refusal of consent to assign on behalf of the landlord. Plus, if the landlord isn’t satisfied with the references provided, then they can refuse the assignment or impose further restrictions on the assignments; for example, demanding 6 months rent in advance.
Could I sell the business with the commercial lease?
Yes. In such scenarios, the lease is often assigned for a fee of £1, while the new tenant will also pay an additional fee for the fixtures and fittings within the building as well as the business itself. Staff contracts can also be transferred to the new owner with their terms and conditions, though if the buyer does not want to take on the employees then you would need to offer them a settlement for redundancy. Transferring the “goodwill” typically includes transferring existing clients/customers and not opening a new business offering the same service in the same area as the new tenant. Essentially, if you were to start a new business offering the same services, you would need to give up all benefit of the location, clientele and reputation of your previous business which you sold to the buyer.
How long does a commercial lease transfer take?
Typically, the process can take around 6 to 8 weeks from start to completion, but this timescale can be much shorter on longer depending on how quickly paperwork gets completed. Delays can also happen if the landlord is reluctant to give consent for the lease’s assignment, or if certain restrictions are imposed.
How much does a commercial lease transfer cost?
The landlord’s legal costs for the assignment of the lease are usually paid by the incoming tenant, but the assignor and assignee can choose to split the cost should they wish. Although it is difficult to provide an approximate estimate, our commercial lease lawyers can provide an in-depth breakdown of fees payable prior to instruction.
How SMB Solicitors can help?
At SMB Solicitors, we have a dedicated commercial conveyancing department able to assist with a broad range of different commercial property matters. We take a client-focused approach, prioritising efficiency and frequent communication without cutting corners with our service. To book an appointment with one of our commercial lease lawyers, please us email info@smbsolicitors.co.uk
