Assignment Flashcards
What is Assignment?
Transfer of leasehold interest from existing tenant to a new tenant
Who does landlord deal with after assignment?
With the assignee, who takes over exclusive possession and is responsible for tenant obligation
Does the assignor lose all rights to use the premises after assignment?
Yes
Why would a tenant assign a lease?
- No longer need premises
- Cannot afford rent
If the lease is silent, what is the rule on assignment?
Assignment is freely allowed
What are the types of assignment covenants?
1) Absolute covenant
2) Qualified covenant
3) Fully qualified covenant
What is the absolute covenant for assignment?
Common in commercial lease – assignment is completely prohibited
What is the qualified covenant for assignment?
Assignment allowed only with landlord’s consent
What is the fully qualified covenant?
A landlord must act reasonably when considering consent and must make a decision within a reasonable time
What is a reasonable time in relation to a fully qualified covenant?
Case law suggests days or weeks, but not months.
What are valid reasons for a landlord withholding consent?
- Proposed use does not align with landlord’s business strategy
- Assignee cannot prove financial stability
What are unreasonable reasons for landlord withholding consent?
- Personal dislike of assignee
- Discriminatory grounds (e.g. race, sex, disability)
What is a tenant’s remedy for landlord unreasonably refusing or delaying consent?
Can claim damages, including legal and agent costs
What are landlord’s conditions for assignment?
- All rent must be paid to date
- Assignee must provide guarantor for rent and obligations
What if the landlord’s conditions are not met for assignment?
If conditions are not met, the landlord may reasonably withhold consent
What is privity of contract?
Original tenant remains liable for lease obligations even after assignment
What is privity of estate?
Current landlord and tenant can enforce lease obligations against each other
When is a relevant date for assignment?
Pre and Post 1 January 1996
What is the impact on assignment on liabilities for leases pre 1996?
The assignor remains liable under privity of contract
What is the impact of liability on assignments of leases post 1996?
Assignor is released from liability upon assignment
Who is liable for obligations in old leases?
The original tenant
How is incoming tenant liable in old lease?
If it gives a direct covenant to the landlord
How is the original tenant kept as liable in a new lease?
With an Authorised Guarantee Agreement (AGA)
What is an AGA?
A contract where outgoing tenant guarantees the assignee’s obligations
