Assignment Flashcards
What is assignment in a lease?
Form of alienation where the lease is assigned from assignor to assignee
Why might a tenant want to assign the premises?
If they no longer need them for the purposes of their business or cannot afford to keep paying rent
What happens if a lease is silent regarding assignment?
Tenant is free to assign
What type of covenant against assignment is common in commercial leases?
Absolute covenant against assignment of part of the premises
What does S19(1)(a) do regarding qualified covenants?
Converts a qualified covenant against assignement into a fully qualified covenant
What must a landlord do when giving consent for assignment?
Give its decision on consent within a reasonable time
What are examples of reasonable withholding by a landlord?
- Justifiable concerns about assignee’s ability to pay the rent
- Lack of references
- Proposed use of premises
What constitutes unreasonable withholding by a landlord?
- Discrimination
- Personal dislike
What may a tenant claim if the landlord does not act reasonably?
Damages
What do commercial leases generally contain regarding consent for assignment?
- Circumstances that parties agree will be reasonable grounds
- Conditions that may be imposed on assignment
What is the common law position for assignement of old leases?
Original tenant remained liable to the landlord to pay the rent and perform other obligations under privity of contract
What must the new tenant do regarding covenants in a lease under an old lease?
Covenant directly with the landlord to observe all the tenant’s covenants in the lease
What legislation applies to new leases granted on or after 1 Jan 1996?
Landlord and Tenants Covenants Act (1995)
What happens to the original tenant’s liability upon assignment of a new lease?
Original tenant is released from liability and all tenant covenants are passed to the new tenant
What is an Authorised Guarantee Agreement (AGA)?
Way in which the original tenant can agree to guarantee the obligations of an incoming tenant - often obligatory in a commercial lease
Under what condition can a landlord insist on an AGA if the lease is silent?
If it is reasonable to do so (e.g. tenant’s ability to pay rent is in doubt)
What does the outgoing tenant guarantee under an AGA?
Only guarantees the next tenant
What does the landlord’s solicitor do in the Pre-Exchange procedure?
- Confirms receipt of application, sets out any requirements
- If client wishes to proceed in principle, drafts licence to assign and sends to tenant’s solicitor
What are the responsibilities of the tenant’s solicitor in the Pre-Exchange procedure?
- Applies for consent
- Prepares draft contract (if applicable) and deduces title. Forwards licence to assign to assignee’s solicitor.
- Answers pre-contract enquiries.
- Once agreed, engrosses the contract, obtains tenant’s signature and sends engrossment to assignee’s solicitor.
What does the assignee’s solicitor do in the Pre-Exchange procedure?
- Assists tenant’s solicitor if anything needed for consent.
- Reviews draft contract (if applicable) and investigates title. Reviews and reports on lease. Reviews the licence to assign.
- Raises pre-contract enquiries and searches.
- Arranges for assignee to sign contract
What does the landlord’s solicitor request during the Consent Application?
Asks the tenant’s solicitor to give an undertaking for costs.
What must the tenant’s solicitor ensure during the Consent Application?
Makes sure they have enough money in the client account from the client to cover the undertaking.
What does the landlord’s solicitor do after the undertaking is provided?
Drafts the licence.
What does the tenant’s solicitor do in the Draft Contract and Lease stage?
- drafts contract if parties want to bind themselves subject to Landlord’s consent
- deduces title by providing official copies of leasehold title or landlord’s title for leases under 7 years.
What does the assignee’s solicitor check in the Draft Contract and Lease stage?
Checks the deduced title, usually without the landlord’s solicitor being a party to this.
What is the usual condition for the assignee regarding the lease?
Assignee usually takes lease as it is, but in rare instances, the landlord may agree to vary the lease, requiring a deed of variation.
What does the tenant’s solicitor do in the Investigation of Title, Searches and Enquiries stage?
Deduce their leasehold title and the assignee’s solicitor should investigate it, including landlord’s title if the lease is unregistered.
What enquiries does the assignee’s solicitor raise?
Raises CPSE1 enquiries and CPSE4 enquiries specific to the assignment of a lease.
What is the exchange process similar to?
Similar to freehold – Law Society Formula B.
Is a deposit usually required for a rack rental lease?
No deposit is usually required.
What is the usual deposit for the assignment of a long residential lease?
A 10% deposit would be usual, similar to a freehold.
What may the contract specify regarding completion?
May set a fixed completion date or specify conditions for completion.
What does the assignee’s solicitor do during completion?
Sends Tenant’s solicitor completion monies.
Who agrees to complete and date the licence to assign?
Landlord’s solicitor, tenant’s solicitor, and assignee’s solicitor agree over the phone.
Who agrees to complete and date the deed of assignment?
Tenant’s solicitor and Assignee’s solicitor agree over the phone.
What does the assignee’s solicitor do post-completion?
- Arranges to submit SDLT or LTT return and pay
- Registers assignment if necessary
- Sends formal notice of assignment to landlord’s solicitor if necessary
What does the LL’s solicitor do at the pre-completion stage?
Engrosses licence to assign in triplicate (three copies), arranges for landlord to execute one copy
What does the Tenant’s solicitor do at the pre-completion stage?
- Arranges for tenant to execute one copy of the licence to assign
- Prepares and sends a completion statement detailing the money due on completion (eg, any apportioned annual rent, service charge and insurance rent)
- Responds to requisitions on title
- Approves deed of assignment and arranges for tenant to execute
What does the assignee’s solicitor do at the pre-completion stage?
- Arranges for assignee to execute one copy of the licence to assign
- Obtains funds from assignee needed to complete as per completion statement
- Raises requisitions on title
- Raises pre-completion searches – ALWAYS OS1 Search of the whole of the tenant’s leasehold title
- Drafts deed of assignment. If registered Land – this will be in Form TR1
