Guide to our Licence to Assign a Lease Template

Posted by David Cammack on 12th May 2015

Here is Legalo’s guide to our Licence to Assign a lease template, that is for a tenant who has leased commercial property and now wishes to transfer the lease’s remaining term to someone else – “the assignee”. The template provides for the landlord to give consent to the tenant to assign a lease which is a new lease under the Landlord and Tenant (Covenants) Act 1995 (meaning a lease granted on or after 1 January 1996, unless it was made either (a) pursuant to an agreement entered into, or an option or right of first refusal granted, before 1 January 1996, or (b) pursuant to a court order made before 1 January 1996).

Under this Act, for such a new style of lease the tenant will nearly always be required by the landlord to give an “authorised guarantee agreement” (or AGA) to guarantee the payment of the rent, etc by the assignee. This will generally be a document signed separately. Any existing guarantor for the existing tenant is also to sign the licence to assign.

NB The wording for an AGA is not included within the template licence, as you should use the one that appears in the lease at least initially. If that is not available, or if the wording for it is not agreed to now by the tenant, a template AGA is available from us.

This template includes a few options you can select from, so it works whether or not:
1. a guarantor is in place to guarantee the tenant’s duties to the landlord; and
2. a right to renew the lease when it ends applies (A.K.A. “security of tenure”).

Our template licence to assign is not appropriate to be used (without adequate revisions) for old leases (i.e. ones predating the Landlord and Tenant (Covenants) Act 1995 coming into force) that predate 1 January 1996 (or post-date 1 January 1996 but were made either (a) pursuant to an agreement entered into, or an option or right of first refusal granted, before 1 January 1996, or (b) pursuant to a court order made before 1 January 1996), which will be one where the original tenant remains liable throughout the lease’s term, even if it has assigned its interest, and without the need to have an AGA in order to continue the original tenant’s liability.

If the licence to assign the lease varies the rent, there is a risk it may incur Stamp Duty Land Tax. This draft does not do that.

Clause by clause guide to our Licence to Assign

Date – At this point fill in only the year. The complete date can be inserted by hand when the licence is signed by everyone.

Party clauses – Fill in the names of the tenant, the landlord and the assignee, together with their addresses. Where a party is a company, fill in the country it is incorporated in and its registered number. If someone guaranteed the tenant’s duties under the lease, fill in their details for party 3 – if not, party 3 should be deleted.

Background

(B) Remove this clause if the tenant’s duties in the lease weren’t guaranteed.

Numbered clauses in the Licence to Assign

1. Interpretation – Here we have set out the main defined terms.

  • Authorised Guarantee Agreement (“AGA”) – this licence requires the tenant to enter into a separate AGA (rather than giving its AGA within this licence) – see clause 2.3. The form of the AGA should have been set out in the lease but it may be a revised version is being agreed to now. If the form has not changed, keep the wording in the square brackets – if it has changed, delete that wording. The agreed form of the AGA should be inserted into the schedule to this template.
  • Guarantee – here, if the guarantee wording was contained in the lease, you need to refer to the Guarantee as being “the Lease”, or if the guarantee was in a different document, refer to it as being the guarantee (following the format of “the Lease”’s definition). Alternatively, the definition should be deleted, if no-one guaranteed the lease.
  • Lease – complete the blanks.
  • Property – complete the property’s address. Identify which parts of the building it comprises, if the lease isn’t of the whole building.

2. Consent – The landlord’s consent to the tenant’s assigning the property is provided by this clause. Clause 2.3 requires the tenant to sign the AGA – this should be printed and signed separately. If the tenant’s guarantor is not also to guarantee the AGA (see the lease for what is required), then delete the words in square brackets.

3. Obligations – The landlord may impose some provisos before he will give his permission. In clause 3.3 insert the landlord’s fee for his noting the lease’s assignment has been completed – usually this is not a significant amount. Please note that such a charge is in addition to the legal costs the tenant must reimburse in accordance with clause 4. In clause 3.4, fill in the relevant person’s name. In clause 3.5 if the tenant’s guarantor is not also to guarantee the AGA (see the note on clause 2.3 above), the words in square brackets should be deleted.

4. Landlord’s costs – Normally the tenant will reimburse the landlord for its legal costs of providing its consent to the assignment (as the lease usually requires this) – clause 4 requires this. Select the right option for whether VAT applies or not.

5. Re-entry in the Lease – As a result of a breach by the tenant, the lease may be liable to be cancelled by the landlord if such a power is set out in the lease. If so, then clause 5 also gives the landlord the power to cancel it if the licence is breached. If clause 5 is not included, the landlord’s sole remedy is a claim for damages for breach.

6. Registration of this licence – If the original lease was registered (as it was for 7 years or more when first granted), then the assignment needs registering. If not, then delete the whole clause.

7. Indemnity – Both assignee and tenant are liable if either breaches this licence.

8. Tenant’s Guarantor – Delete the clause if no-one guaranteed the lease.

Schedule – Insert the wording for the agreed form of the AGA here. See the note at the start of this guide on the AGA.