Property Management - Assignation & Sublets

Question 1

What is the difference between an assignation and sublet?

Answer 1

• Assignation – Legally removes the tenants responsibility for the unit and assigns it to another party
• Sublet – The tenant (now head tenant) remains legally responsible, however the sub tenant will take over occupation and pay rent to the head tenant (usually at a higher rate)

Question 2

What is the advantage of subletting?

Answer 2

• It takes financial pressure of the outgoing tenant.
• The head tenant may also make a profit rent.

Question 3

Can a landlord refuse a consent?

Answer 3

• Yes, however most leases state that a landlords consent must not be unreasonably withheld.
• International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd:
  To protect the landlord form the premises being used in an undesirable way or by an undesirable assignee

Question 4

Why would a LL withhold consent for assignations

Answer 4

• The assignee does not have a strong covenant strength
• If the assignee’s covenant strength is weaker than the assignor
• If there are arrears
• If the assignor is in breach
• If a change of use is required

Question 5

Case Law for withholding consent

Answer 5

• If a reverse premium to be paid to the sub-tenant reduces the market rent for the property.
• The financial standing of the sub-tenant is weaker.
• The nature of the sub-tenants business is not suited.

Question 6

Case Law – Consent

Answer 6

• International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd
• To protect the landlord form the premises being used in an undesirable way or by an undesirable assignee
• Tenant has to prove that consent has been unreasonably withheld
• Landlord does not have to prove conclusions that led to refusal
• Can withhold due to the proposed use

Question 7

Case Law - Assignation with outstanding RR

Answer 7

• Lousada & Co v J.E. Lesser (Properties) Ltd
• It was not held unreasonable for a landlord to insist that consent to an assignation was conditional on a long outstanding rent review being settled

Question 8

Case Law - Assignation and Dilapidations

Answer 8

• A.B Leisure Ltd v Renfrew District Council
• Considered unreasonable to serve a schedule upon receipt of the application to assign and to make completion of it a condition of consent