The term “alienation” means the transfer of legal title of ownership in a property to another party in the process of assignment or creation of a new interest such as an underlease.
- Alienation clauses often include restrictions on who is allowed to occupy the property as well as those who have legal property rights in the strict sense. Their effects can therefore be very far reaching.
- Organisations should be aware for example that when taking a commercial lease there is likely to be a standard term prohibiting sharing of the property, which if accepted would inhibit certain kinds of collaborative working and raising income from excess space and facilities through desk space agreements to other organisations
- Tenants’ break rights may be of more value to an organisation than a right to assign (i.e. transfer) or underlet the whole of the property to another party. [Break rights]
- Assignment and underletting of commercial tenancies is now regulated under the Landlord and Tenant Act 1988 which imposes duties on the landlord: to give consent, except where it is reasonable not to do so; and to give written consent without undue delay. If the landlord also requires the consent of a superior landlord, reasonable steps should be taken to secure consent without undue delay. If consent is given subject to any conditions, those conditions must be specified; or if consent is refused then the reasons for refusal should be stated.
- The burden of proof in any litigation is on the landlord to show that it has complied with these duties.
- It is generally not reasonable for a landlord to withhold consent on matters outside the lease and the landlord-tenant relationship, or if the landlord argues that the tenant will affect the letting of other properties in the vicinity. Similarly with the letting of other parts of the building of which the said letting forms a part only; the landlord wants re-possession; the landlord wishes to withhold consent on race, sex or disability grounds.
- However, if the landlord withholds consent on the grounds of a proposed use by the new tenant, it may be held to be reasonable even if this use was not excluded in the lease.
- Reasons a landlord may justifiably give for refusal to assign may include: insufficient information supplied on or by the proposed tenant to make a judgement; character and financial standing of the assignee, and the landlord’s judgement that the future viability of the building as a whole could be jeopardised.
- A tenant who has assigned a lease may remain liable for rent and other obligations if the original lease was entered into before the 1st of January 1996, or if guarantees have been given at the time of assignment. [Liability under leases]