LAW
Letting your tenant go
Consenting to assignment and underletting
If you are a landlord of commercial property , there will probably come a time when a business tenant will want the right to move out and either pass on the lease or sublet to another business . Be careful how you deal with this as there are legal penalties for landlords who are found to be unreasonable in objecting to a tenant ’ s proposals .
“ Letting commercial property isn ’ t just about collecting the rent ,” says Ian Cowan , commercial property solicitor with Richard Reed Solicitors . “ Landlords are also looking at the credentials of tenants while trying to maintain the attractiveness of their properties . That makes it all the more important to be able to exercise some control over who takes on a lease if the original tenant moves out .
The landlord ’ s duty to be reasonable Most leases will state that the tenant may not assign without the landlord ’ s consent , which cannot be unreasonably withheld or delayed , unless it is reasonable to refuse it , and not to impose unreasonable conditions . The landlord must also set out in writing any conditions for giving consent or , if consent is refused , the reasons for the refusal . The concept of reasonableness is intended to allow flexibility to reflect specific circumstances .
Reasonable grounds for refusal The first place to look is the lease itself , which may include specific circumstances in which they will be entitled to refuse consent and specific conditions they will be entitled to impose . A circumstance for refusal might
Advice : Ian Cowan of Richard Reed Solicitors .
be where a proposed assignee is a foreign company ; an agreed condition might be that the assignee provides a satisfactory guarantor .
The landlord may also refuse consent or impose conditions for other reasons if , of course , reasonable . The court has established the principle that to be ‘ reasonable ’, a landlord ’ s grounds for withholding consent must be linked to the landlord and tenant relationship .
How we can help A landlord who gets the consent process wrong could be faced with a damages claim for breach of statutory duty and possibly a court order allowing a tenant to assign or underlet without consent . Your solicitor can explain what your lease allows .
For further information , contact Ian Cowan on 0191 567 0465 or email ian . cowan @ richardreed . co . uk .
How long is too long ? The requirement to give a decision within a reasonable time is another potential trap for landlords . The best practical advice is to move quickly once a tenant makes a formal request for consent . Beyond that , there are some useful pointers in case law :
• As a rule of thumb , the landlord should aim to give a written decision , with reasons , within 21-28 days , although there may be situations where 21 days is too long , or where it would be reasonable to take longer .
• If the tenant explains that there are particular reasons for needing a fast decision , the landlord should take this into account , as it could mean that the reasonable period is shorter than it might otherwise have been .
• The clock only starts running when the tenant has provided all the information the landlord needs to make a reasoned decision . If the initial request is accompanied by only sketchy financial information , the landlord should ask for whatever they need and they are entitled to wait for it before giving a decision .
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