Alienation

Question 1

What is alienation?

Answer 1

Alienation simply means a disposal of all or part of the tenant’s interest in the lease.

Question 2

What is assignment?

Answer 2

Assignment is a form of alienation, whereby the existing tenant (assignor) assigns the lease to the new tenant (assignee).

Question 3

If a lease is silent on assignment, is the tenant free to assign?

Answer 3

Yes, but in practice a commercial lease will likely require that the tenant apply to the landlord for consent.

Question 4

What will the landlord’s solicitor do at the pre-exchange stage of an assignment procedure?

Answer 4

The landlord’s solicitor will:

-take instructions

-confirm receipt of application

-if client wishes to proceed in principle, draft licence to assign and send to tenant’s solicitor

Question 5

What will the tenant’s solicitor do at the pre-exchange stage of an assignment procedure?

Answer 5

The tenant’s solicitor will:

-take instructions

-apply for consent

-prepare draft contract and deduce title

-answer pre-contract enquiries

-engross the contract, obtain tenant’s signature and send engrossment to assignee’s solicitor

Question 6

What will the assignee’s solicitor do at the pre-exchange stage of an assignment procedure?

Answer 6

The assignee’s solicitor will:

-take instructions

-assist tenant’s solicitor if needed

-review draft contract and investigate title

-review and report on lease and licence to assign

-raise pre-contract enquiries and searches

-arrange for assignee to sign contract

Question 7

Who will draft a licence to assign?

Answer 7

The landlord’s solicitor.

Question 8

What enquiries will the assignee’s solicitor raise at the pre-exchange stage?

Answer 8

CPSE1 enquiries and CPSE4 enquiries.

Question 9

How is the process of exchange of a contract for assignment carried out?

Answer 9

-The tenant’s solicitor and assignee’s solicitor exchange in similar manner as for a freehold contract (usually adopting Law Society B)

-No deposit is usually payable for assignment of a rack rental lease

-The contract may set a fixed completion date, or specify that completion is conditional

Question 10

What will the landlord’s solicitor do at pre-completion stage of an assignment procedure?

Answer 10

The landlord’s solicitor will:

-engross the licence to assign in triplicate, arrange for the landlord to execute one copy

Question 11

What will the tenant’s solicitor do at the pre-completion stage of an assignment procedure?

Answer 11

The tenant’s solicitor will:

-arrange for tenant to execute one copy of the licence to assign

-prepare and send a completion statement

-respond to requisitions on title

-approve deed of assignment and arrange for tenant to execute

Question 12

What will the assignee’s solicitor do at the pre-completion stage of an assignment procedure?

Answer 12

The assignee’s solicitor will:

-arrange for assignee to execute one copy of the licence to assign

-obtain funds from assignee needed to complete as per completion statement

-raise requisitions on title and pre-completion searches (OS1 search of the whole of the tenant’s leasehold title)

-draft deed of assignment

Question 13

What will the assignee’s solicitor do at the post-completion stage of an assignment procedure?

Answer 13

The assignee’s solicitor will:

-arrange to submit SDLT or LTT return and pay as appropriate

-register assignment if necessary

-send formal notice of assignment to landlord’s solicitor

Question 14

What is underletting?

Answer 14

Underletting is another form of alienation. Unlike assignment, the tenant does not pass its leasehold interest on entirely, but instead grants an underlease to an undertenant.

Question 15

What will the landlord’s solicitor do at the pre-exchange stage of an underletting procedure?

Answer 15

The landlord’s solicitor will:

-take instructions

-consider application to underlet

-if landlord is happy in principle, request undertaking for costs and issue draft licence to underlet to tenant’s solicitor

Question 16

What will the tenant’s solicitor do at the pre-exchange stage of an underletting procedure?

Answer 16

The tenant’s solicitor will:

-take instructions

-apply for consent to underlet

-prepare draft underlease

-review draft licence to underlet and send copy to undertenant

-deduce title and respond to any queries on title

-answer pre-contract enquiries

-once agreed, engross the agreement for underlease, obtain tenant’s signature and send counterpart to undertenant’s solicitor

Question 17

What will the undertenant’s solicitor do at the pre-exchange stage of an underletting procedure?

Answer 17

The undertenant’s solicitor will:

-take instructions

-review draft underlease and agreement for underlease and amend as required

-investigate title and raise any queries on title

-raise pre-contract enquiries

-arrange for tenant to sign counterpart underlease

Question 18

How is the process of exchange of a contract for underletting carried out?

Answer 18

On exchange of a contract for underletting:

-the tenant’s solicitor and undertenant’s solicitor exchange in similar manner as for a freehold contract (usually adopting Law Society B)

-no deposit is usually payable

-the contract may set a fixed completion date, or specify that completion is conditional

-the agreement for underlease will usually have a draft of the agreed form of underlease annexed to it

Question 19

What will the landlord’s solicitor do at the pre-completion stage of an underletting procedure?

Answer 19

The landlord’s solicitor will:

-engross agreed form of licence to underlet and circulate for execution and obtain landlord’s execution to licence to underlet

Question 20

What will the tenant’s solicitor do at the pre-completion stage of an underletting procedure?

Answer 20

The tenant’s solicitor will:

-prepare original and counterpart underlease, obtain tenant’s signature to original and send counterpart to undertenant for signature

-prepare and send completion statement

-obtain tenant’s execution to underlet

Question 21

What will the undertenant’s solicitor do at the pre-completion stage of an underletting procedure?

Answer 21

The undertenant’s solicitor will:

-arrange for undertenant to sign counterpart underlease

-obtain funds from client needed to complete as per completion statement

-raise pre-completion searches (OS1 search for underletting of the whole, OS2 search for underletting of part and OS3 search where underlease is not registrable)

-obtain undertenant’s execution to licence to underlet

Question 22

What will the tenant and undertenant’s solicitors do at the post-completion stage of an assignment procedure?

Answer 22

The tenant’s solicitor will send notice of underlease to landlord’s solicitor.

The undertenant’s solicitor will:

-arrange to submit SDLT or LTT return and pay as appropriate

-register underlease if necessary

Question 23

How is a landlord’s consent to assignment/underletting documented?

Answer 23

in a formal deed being a licence to assign or licence to underlet.

Question 24

Following an assignment/underlease, when must the assignee/tenant give the landlord formal notice that the transaction has been completed?

Answer 24

The assignee/tenant will be required to give the landlord formal notice within a month that the transaction has been completed.

Question 25

What is the time limit for consent to assign/underlet in licences to assign/underlet?

Answer 25

Usually 3 months.

Question 26

Who pays the landlord’s costs of considering an application to assign/underlet?

Answer 26

The tenant.