Lease Assignment and Sub-letting Issues

No one knows for sure what their future holds and there could be some circumstances where you cannot continue to operate your business and need to sell it. When you get sound legal advice a commercial lawyer will be sure this eventuality is provided for in the lease. There should be a clause stating that the landlord cannot reasonably stop you from assigning your lease to someone else.

You will need to do this if you sell the business before the lease is up, or sub-let it to another person. However, if this happens it is essential to ensure that in the original lease there is a clause to say that you will not be held responsible if the person to whom you assign the lease defaults on the  payments. Otherwise you can be held responsible for the cost of the lease when you are no longer running the business.

Grounds for refusing assignment

Reasonable grounds for refusing the assignment of your lease would be if the tenant had a poor credit history or if they intend to use the business for another purpose. Another reason could be if the potential tenant was not likely to be able to run the business properly. If the business failed, the tenants would not be able to pay the rent so the landlord would either lose the money owed to him or have to go to court to get it – a costly and time consuming process.

Make sure you are not liable

If your lease is covered by the Commercial Tenants Act, any clause stating that you are liable for the cost of the lease if the new tenant defaults on payment is illegal.  However, not all leases are covered by the Act, so make sure you understand the wording in yours. You don’t want to find out that you are responsible for the lease even though you have assigned it to another person.

Going from tenant to landlord

Subletting all or part of your business premises may also be part of the future. With a sub-lease, you are still legally responsible for the lease if the new tenant defaults on payment. That is why it is essential to have a credit check done on them before allowing them to become your new tenants. You essentially become their landlord, so must treat them in the same way as your landlord treats you. That is, do all the necessary checks that any landlord should do.

You also need to be sure that the business they are going to carry on in their part of the premises is an allowed activity. It is also a good idea to take photos of all the parts of the shop that will be under their jurisdiction in their presence, so that should any damage occur in the future, they can be held responsible for it.  Subletting is sometimes a complex situation, but a commercial lawyer can sort it all out for you.