PP 10 - Alienation Flashcards
(33 cards)
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 when a tenant requests for assignment?
- Must respond in writing
- Within reasonable time (e.g., 28 days). Failure to respond within reasonable time can lead to damages
- Must give reasons for refusal
When can a landlord reasonably refuse assignment?
- Poor financials of assignee (eg, poor/no accounts, poor reference)
- Proposed use doesnt align with landlord policy (eg, check change of use clause)
- Assignee won’t provide guarantor
- Conditions specified in lease are not met (eg, rent not fully paid, assignee refuses to provide a guarantor)
What are examples of unreasonable refusal of assignment?
Personal reasons.- eg disliking the tenant’s business type
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? (assignment)
- The assignor remains liable for all tenant covenants in the lease for the entire term, even after assignment, because of privity of contract.
- This means the landlord can still sue the assignor if the assignee breaches a covenant, even if the assignor is no longer in possession.
- An assignee is only liable for lease obligations that “touch and concern the land”—those tied to privity of estate—while they remain the tenant.
- Examples of obligations tied to privity of estate:
• Paying rent
• Repairing the premises
• Other covenants that run with the land
What is the rule for liability under post-1996 leases (LTA 1995)?
- Assignor is released from liability upon assignment
- Assignee becomes fully liable for lease obligations
- Landlord may require assignor to agree to an AGA
- An AGA allows the assignor (outgoing tenant) to guarantee the performance of the lease obligations by the assignee (incoming tenant)
Explain 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 will the landlord ask the tenant’s solicitors to give?
An undertaking for costs - landlord’s costs and surveyor’s costs plus VAT are covered
Tenant’s solicitors should therefore ensure they have funds to cover this before giving an undertaking
What happens at assignment completion?
- Assignee sends funds to tenant’s solicitors
- All 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)
- underlease rent must be lower than rent under the tenant’s lease, unless agreed otherwise
- Obligations must mirror head lease
