Alienation

Question 1

What is Assignment?

Answer 1

Transfer of leasehold interest from existing tenant to a new tenant

Question 2

If the lease is silent, what is the rule on assignment?

Answer 2

Assignment is freely allowed

Question 3

What are the types of assignment covenants?

Answer 3

1) Absolute covenant
2) Qualified covenant
3) Fully qualified covenant

Question 4

What is a reasonable time in relation to a fully qualified covenant?

Answer 4

Case law suggests days or weeks, but not months.

Question 5

What is a tenant’s remedy for landlord unreasonably refusing or delaying consent?

Answer 5

Can claim damages, including legal and agent costs

Question 6

What are landlord’s conditions for assignment?

Answer 6

• All rent must be paid to date
• Assignee must provide guarantor for rent and obligations

Question 7

What is privity of contract?

Answer 7

Original tenant remains liable for lease obligations even after assignment

Question 8

What is privity of estate?

Answer 8

Current landlord and tenant can enforce lease obligations against each other

Question 9

When is a relevant date for assignment?

Answer 9

Pre and Post 1 January 1996

Question 10

What is the impact on assignment on liabilities for leases pre 1996?

Answer 10

The assignor remains liable under privity of contract

Question 11

What is the impact of liability on assignments of leases post 1996?

Answer 11

Assignor is released from liability upon assignment

Question 12

Who is liable for obligations in old leases?

Answer 12

The original tenant

Question 13

How is incoming tenant liable in old lease?

Answer 13

If it gives a direct covenant to the landlord

Question 14

How is the original tenant kept as liable in a new lease?

Answer 14

With an Authorised Guarantee Agreement (AGA)

Question 15

What is an AGA?

Answer 15

A contract where outgoing tenant guarantees the assignee’s obligations

Question 16

What type of lease is AGA relevant to?

Answer 16

A new lease

Question 17

What happens to original tenant if there is no AGA in a new lease?

Answer 17

The outgoing tenant is released from liability

Question 18

Does the incoming tenant become automatically liable in a new lease?

Answer 18

Yes, with or without an AGA

Question 19

What is the effect of a qualified covenant?

Answer 19

It is automatically upgraded by statute to a fully qualified covenant, so they must act reasonably.

Question 20

What does the assignment take form as?

Answer 20

A deed of assignment

Question 21

What is a completion statement?

Answer 21

A calculation of proportion of rent / service charge due from assignee

Question 22

Who prepares completion statement?

Answer 22

The tenant’s solicitor

Question 23

What happens post completion of assignment?

Answer 23

1) Submits SDLT
2) Register assignment at HM Land Registry
3) Send formal notice of assignment to landlord’s solicitor

Question 24

What is underletting?

Answer 24

When a tenant grants an underlease to an undertenant while retaining its own lease with landlord

Question 25

What is subletting?

Answer 25

Underletting

Question 26

What is the key rule on an underlease?

Answer 26

Must be for a shorter term (even by one day)

Question 27

Who is responsible for obligations in an underletting?

Answer 27

The tenant is responsible for paying the rent to the landlord and its obligations

Question 28

What is the rule on underletting if the lease is silent on it?

Answer 28

The tenant is free to underlet

Question 29

What is the rule on a qualified covenant?

Answer 29

In assignment / underletting it is fully upgraded to a fully qualified covenant, meaning that a landlord cannot unreasonably withhold consent

Question 30

Is the relationship between landlord and undertenant privity of contract or privity of estate?

Answer 30

None – they have no direct relationship

Answer 31

No

Question 32

How can the landlord enforce against an undertenant?

Answer 32

With a direct covenant agreement as part of the license to underlet

Question 33

What is a monthly periodic tenancy?

Answer 33

Agreement that continues indefinitely, rolling over each month, unless terminated with proper notice

Question 34

What is an agreement for underlease?

Answer 34

Landlord’s consent is delayed, but tenant and undertenant wish to commit

Question 35

What is the way a lease title is deduced determined by?

Answer 35

If lease is over 7 years or under 7 years

Question 36

How is title deduced if lease is over 7 years in underletting?

Answer 36

Tenant provides official copy of their leasehold title

Question 37

How is title deduced if lease is under 7 years in underletting?

Answer 37

Tenant provides freehold title and copy of the lease

Question 38

What pre-completion searches does undertenant make?

Answer 38

- OS1 – if underletting whole - OS2 – if underletting part - OS3 – if underlease not registrable

Question 39

What does undertenant’s solicitor do post-completion?

Answer 39

- Submit SDLT or LTT - Register underlease if required

Question 40

What are key features of a license to assign / underlet?

Answer 40

1) Executed as a deed 2) Limited in time 3) Limited to specific transaction 4) Tenant pays landlord’s costs

Question 41

What must the existing or new tenant do after completing an assignment or underletting?

Answer 41

Notify the landlord within one month

Question 42

Why is a notice required for the landlord after completion?

Answer 42

To update records and issue rent demands to the correct tenant

Question 43

What are two different forms of alienation to assignment and underletting?

Answer 43

1) Charging the lease 2) Sharing occupation

Question 44

What is charging a lease?

Answer 44

Tenant uses lease as security

Question 45

Will landlord consent be required for charging a lease?

Answer 45

Yes

Question 46

What is sharing occupation?

Answer 46

Tenants wish to share space without creating an underlease

Question 47

When is sharing occupation seen?

Answer 47

Group companies sharing the same premises

Question 48

What does 2020 Code for Leasing Business Premises provide as best practice for alienation clauses?

Answer 48

1) Reasonable consent 2) Conditions for consent should be clearly stated in lease 3) Share occupation should be allowed without consent 4) Tenants should be able to charge their lease without landlord consent