Alienation Flashcards
What is assignment?
Sale or transfer of the leasehold interest, assigned by the current tenant (“Assignor”) to the new tenant (“assignee”).
Assignee may pay for the leasehold interest at a premium or may agree to pay the rent and perform covenants under the lease.
What are the formalities for an assignment?
- License to assign (deed)
* Clear on its face as a deed
* signed + witnessed
* Dated - AGA
* May be in License to Assign or standalone deed - Amend proprietorship register
* if property is registered
* No short lease exception applies.
In what circumstances can a tenant assign the lease?
It depends on the terms of the lease, there may be an absolute, qualified or fully qualified covenant against assignment (see land law).
Usually, commercial leases contain an absolute covenant against assignment of part.
What are the consequences for the assignor (outgoing tenant) of assignment?
Old Lease
* Remains liable for covenants breached by incoming tenant (assignee);
* Should ensure assignee directly covenants with landlord.
New Lease
* outgoing tenant automatically released from liability (EXCEPT if assignation is in breach of alienation covenant or breach occurred before assignation)
* May be conditional consent, may have given an AGA.
What is the procedure for a tenant’s solicitor before exchanging contracts for an assignment?
Apply for consent to assign if required, prepare a draft lease agreement, forward the license to assign to the assignee’s solicitor, and answer pre-contract enquiries.
What must the assignee’s solicitor do before exchanging contracts for an assignment?
Supply necessary documents for consent, review the draft lease agreement, investigate the title, review and report on the lease and license to assign, and raise pre-contract enquiries and searches.
What are the steps for a landlord’s solicitor before exchanging contracts for an assignment?
Confirm receipt of the application for consent to assign, set out any requirements (i.e undertaking for costs), draft the license to assign, and send it to the tenant’s solicitor.
What is required in a consent application for an assignment?
It should be done early in the transaction, usually not required for long leases, and include an undertaking for costs from the tenant’s solicitor to cover the landlord’s solicitors and surveyors’ costs.
What does deducing title involve in the assignment process?
- If the lease is registered, look at the official copies.
- If the lease is unregistered, look at the landlord’s title.
- Answer CPSE 1 and CPSE 4
What is the procedure for completion of assignation from the tenant’s solicitor’s perspective?
- Tenant executes license to assign
- Tenant’s solicitor prepares and sends completion statement
- Solicitor responds to requisitions on title
- Solicitor approves deed of assignment and tenant executes
- Agree with assignee solicitor date to complete.
What is the procedure for completion on assignation from the perspective of the assignee’s solicitor?
- Assignee executes license to assign
- Obtain funds from assignee
- Raise requisitions on title
- Raise pre-completion searches (OS1, OS2, OS3)
- Draft deed of assignment
- Send completion monies
- Arrange to submit SDLT or LTT return and pay this
- Register assignment if lease registered
- Send formal notice of assignment to landlord
What is the procedure for completion on assignment from the landlord’s solicitor’s perspective?
Engross the license to assign (3 copies) and execute.
What is underletting?
A tenant grants a lease out of its existing leasehold (the head lease) to the subtenant.
- Must be for a shorter term than the headlease.
What are the formalities for underletting?
- Deed of Underletting
- Short lease exception applies
- May need to be registered in proprietorship register
- License to underlet
What are the restrictons on underletting typically imposed in commercial leases?
- Qualified alienation covenant (automatically upgraded to fully qualified)
- Absolute covenant against underletting of part
- Prevents underletting together with property not belonging to landlord, on payment of lump sum or rent free period longer than market standard.
Requires that underlease is at rent no lower than tenant’s rent and contains same covenants or more onerous ones.
