PP 10 - Alienation Flashcards
What is alienation in leasehold law?
The disposal of all or part of a tenant’s interest in a lease.
What is an assignment?
The transfer of the whole lease from the tenant (assignor) to a new tenant (assignee).
What happens after an assignment?
Assignor loses rights and obligations (except continuing liabilities)
* Assignee becomes the new tenant
* Landlord deals with the assignee
When might a tenant want to assign?
- Business relocation or closure
- Financial difficulty
- Need for better premises
What are the three types of covenants controlling assignment?
- Absolute – Assignment forbidden (no upgrade)
- Qualified – Needs landlord’s consent (upgraded to fully qualified by s19(1)(a) LTA 1927)
- Fully Qualified – Consent not to be unreasonably withheld
What does s1 LTA 1988 require from landlords?
- Must respond in writing
- Within reasonable time (e.g., 28 days)
- Must give reasons for refusal
When can a landlord reasonably refuse assignment?
- Poor financials of assignee
- Tenant-mix policy
- Assignee won’t provide guarantor
- Rent not paid
What are the tenant’s remedies if the landlord acts unreasonably?
- Claim damages
- Court order permitting assignment
What is the rule for liability under pre-1996 leases?
- Privity of contract: Original tenant remains liable
- Privity of estate: Assignee liable while in possession
What is the rule for liability under post-1996 leases (LTA 1995)?
- Assignor is released from liability
- Assignee becomes fully liable
What is an Authorised Guarantee Agreement (AGA)?
- Original tenant guarantees the next tenant’s performance
- Applies to immediate assignee only
- Drops off after further assignment
- Only required if reasonable
Who can the landlord sue if an AGA is in place?
- The assignee and the assignor (while AGA is valid)
- Previous assignors cannot be pursued once lease is reassigned
Is exchange of contracts always used in lease assignment?
No — often skipped. Pre-exchange and pre-completion stages are combined.
What is the key document granting landlord consent?
Licence to assign, executed by all parties.
What must tenant’s solicitor ensure before giving an undertaking?
They have the client’s funds to cover landlord’s costs.
What happens at assignment completion?
- Assignee sends funds
- Solicitors date the deed of assignment and licence
- Documents are exchanged
What are post-completion steps for the assignee’s solicitor?
- File SDLT/LTT return
- Register assignment (if needed)
- Notify landlord formally
What is underletting?
Tenant grants an underlease to an undertenant — retains their lease and remains liable to landlord.
Must an underlease be shorter than the tenant’s lease?
Yes — even by one day.
Why might a tenant underlet?
- Not using all premises
- Temporary vacancy
- Can’t find an assignee
What types of covenant control underletting?
- Absolute: forbidden
- Qualified: consent required (upgraded under s19(1)(a) LTA 1927)
- Fully qualified: consent not to be unreasonably withheld
What’s a key legal difference between assignment and underletting?
In underletting, tenant remains liable; no AGA required.
What is the landlord’s main concern with underletting?
- Financial status of undertenant
- Rent level (must reflect market)
- Obligations must mirror head lease
What legal relationships exist in underletting?
What search is required for non-registrable underleases?
OS3, to confirm landlord can grant lease. No priority period.
When is an agreement for underlease used?
When conditions (e.g., landlord’s consent) must be met before completion.
What documents does the undertenant’s solicitor handle post-completion?
- Submit SDLT/LTT
- Register underlease (if >7 years)
What is the purpose of a licence to assign or underlet?
Written landlord consent — protects landlord and documents terms.
Key features of licences to assign and underlet?
What does the 2020 Leasing Code recommend on alienation?
- Tenants should be allowed to assign/underlet with consent (not unreasonably withheld)
- Sharing with group companies should be allowed without consent
- Charging the lease to a lender should usually not require consent
