Q&A - If I assign the lease on my business premises will I be exempt from future liability?

Q: I have outgrown my leased business premises and want to move. I have two years left to run on my lease, but I have a friend who wants to take over the premises and the lease. If I assign the lease to him will it exempt me from future liability for the premises?

A: If the lease began prior to1st January 1996, irrespective of whether you took it on after that date, you will be liable to the landlord for all future payments under that lease even if it is assigned to someone else.

If the lease began after 1st January 1996 you will almost certainly be required to guarantee payments by the person to whom you have assigned the lease under an authorised guarantee agreement, often called an “AGA”.

Before you can assign the lease you need to get the consent of the landlord. The landlord cannot ‘unreasonably’ withhold consent, but ‘unreasonable’ has a specific meaning in leasehold law. 

The landlord is entitled to know the proposed new tenant is financially viable before agreeing to let him take over the lease and may request proof including accounts, and business, personal and sometimes bank references. The landlord may also want to run a credit check, which he may require you to pay for. Additionally he may request a deposit or guarantee if the new tenant is a new or small limited company. If those conditions are not met the landlord may be acting ‘reasonably’ if he refuses consent.

The lease may allow the landlord to impose other conditions too, so it would be wise to seek proper legal advice about your specific lease.

For the assignment of the lease you, your landlord and the proposed new assignee will each need separate legal representation, and usually you would be responsible for payment of your landlord’s solicitors’ fees as well as your own.

Article 07/10/2019

Sera Jones

Sêra Henderson-Jones

Chartered Legal Executive

Part of our Property team in Oswestry.