Assigning a commercial lease: what outgoing tenants need to check before committing

Assigning a commercial lease can help you leave premises before the term ends, but it is not always a clean exit. Before you commit, you need to check the lease wording, landlord consent, the financial strength of the incoming tenant, any Authorised Guarantee Agreement, repair liability, service charge balances, legal costs and whether assignment is really better than surrender, subletting or using a break clause.

That matters because premises are often one of the largest fixed costs in a business. At the start of 2025, there were an estimated 5.7 million private sector businesses in the UK, and 99.8% were small or medium-sized businesses. So, whether you run a small shop, restaurant, clinic, office or professional practice, the lease you are trying to leave can have a real effect on cash flow, risk and the next stage of your business.

If you are dealing with a lease in England and Wales, the assignment process is usually shaped by the lease, landlord consent requirements and the legal rules around unreasonable refusal of consent. Scotland, Northern Ireland and the Republic of Ireland have different legal systems and procedures, so you should not assume the same process applies without local advice. The practical checks, however, are similar: know what you are transferring, know what you remain liable for, and do not let commercial pressure push you into signing before the risk is clear.

Atalaw Solicitors provides practical support for businesses that need commercial lease solicitors london tenants and occupiers can speak to before they commit. If the assignment is already becoming contested, you may also need advice from landlord and tenant solicitors london or civil litigation solicitors london depending on how the dispute develops.

What does assigning a commercial lease actually mean?

Assignment means you transfer your interest in the lease to someone else. In simple terms, the incoming tenant steps into your position and takes over the lease for the rest of the term.

That can sound straightforward. It often is not.

If you are the outgoing tenant, your main concern is whether assignment actually releases you from future risk. A business owner may think, “I have sold the shop, the buyer has the keys, so I am out.” The lease may say something different. You may still have to guarantee the incoming tenant’s obligations, pay the landlord’s legal costs, clear arrears, complete repair works, or deal with service charge balancing payments after completion.

This is why assignment should be treated as a legal and financial decision, not just an admin step.

Start with the assignment clause

Your first check is the lease itself. Most commercial leases restrict assignment. Some prohibit assignment completely. Others allow assignment only with the landlord’s consent. Many allow assignment of the whole premises but not part. Some set out conditions that must be met before consent is given.

You should check whether your lease says:

• Assignment is absolutely prohibited
• Assignment is allowed only with landlord consent
• Consent must not be unreasonably withheld or delayed
• Assignment is allowed only of the whole premises
• Assignment is conditional on an Authorised Guarantee Agreement
• The incoming tenant must meet financial tests
• Existing breaches must be remedied first
• A rent deposit, guarantor or other security may be required
• The landlord’s legal and surveyor’s costs must be paid

If you are unsure how those provisions work, get advice early. Atalaw’s guide on heads of terms for commercial leases is useful because many assignment problems begin with lease terms that were not properly negotiated when the lease was first granted.

Check whether landlord consent is needed

In many leases, you cannot assign without formal written landlord consent. That consent is usually documented in a licence to assign, often signed as a deed.

In England and Wales, where the lease contains a qualified covenant against assignment, section 19 of the Landlord and Tenant Act 1927 is relevant because it generally prevents consent from being unreasonably withheld. The Landlord and Tenant Act 1988 can also place duties on the landlord when a written application for consent is properly made, including dealing with the application within a reasonable time.

The practical point is simple: do not rely on casual emails, phone calls or agent comments as permission to assign. You usually need the correct formal process.

A proper application for consent should usually include:

• The proposed assignee’s full details
• Company registration information, where relevant
• Accounts, management figures or financial references
• Trade references or landlord references
• Details of the proposed use
• Confirmation of whether the business is being sold
• Proposed completion date
• Any required guarantor or rent deposit information
• Draft assignment documents, where appropriate

If you send a thin application, delay is more likely. The landlord may say it cannot make a decision because it does not have enough information. That may be a fair response.

Understand the Authorised Guarantee Agreement risk

An Authorised Guarantee Agreement, often called an AGA, is one of the biggest issues for outgoing tenants.

An AGA means you guarantee that the incoming tenant will comply with the lease. If they do not pay rent, fail to repair, breach the lease, or create other liability, the landlord may be able to pursue you under the AGA. Section 16 of the Landlord and Tenant (Covenants) Act 1995 allows an outgoing tenant to guarantee performance by an assignee in certain circumstances.

This is where a lot of tenants get caught out.

For example, imagine you assign a café lease to a buyer who seems reliable. They pay you for the business, complete the assignment and trade for 8 months. Then they fall behind with rent, leave the premises in poor condition and stop responding to the landlord. If you signed an AGA, the landlord may look back to you for the arrears and other losses.

That does not mean every AGA is unreasonable. It does mean you should read it carefully before signing.

You should check:

• How long the AGA lasts
• Which obligations it covers
• Whether it ends on the next lawful assignment
• Whether you could be required to take a new lease if the lease is disclaimed
• Whether your personal guarantor is also being asked to remain involved
• Whether the AGA is wider than the lease allows
• Whether the incoming tenant’s financial position justifies the risk

If the assignee is strong, established and financially stable, the risk may feel manageable. If the assignee is newly formed, undercapitalised or dependent on optimistic forecasts, the AGA deserves much closer attention.

Do not ignore repair and dilapidations

Assignment does not automatically wipe away existing breaches. If you have repair obligations under the lease and the premises are already in poor condition, the landlord may require issues to be resolved before consent is granted.

This can become expensive.

A tenant might focus on the sale price for the business and forget the cracked flooring, damaged shopfront, old extraction system, unauthorised partitioning or missing compliance certificates. The landlord may not forget. They may ask for works, undertakings, retention money or conditions in the licence to assign.

Atalaw’s service charges in commercial property article is also relevant here because service charge disputes can sit alongside assignment. A tenant trying to leave may discover that year-end balancing charges, sinking fund contributions or disputed maintenance costs still need to be dealt with.

Before committing, check:

• Whether you have kept the premises in the required condition
• Whether there is a schedule of condition limiting repair liability
• Whether any alterations were authorised
• Whether reinstatement will be required
• Whether service charge accounts are up to date
• Whether insurance rent, utilities or other sums are outstanding
• Whether the landlord has raised any breach or dilapidations issue

For wider property disputes, Atalaw also provides support through debt recovery solicitors london and litigation services where money claims or contested liabilities arise.

Key checks before you agree to assign

Check the incoming tenant properly

It is tempting to treat the incoming tenant as the landlord’s problem. That is a mistake.

If you are signing an AGA, the incoming tenant is also your risk. You need to be slightly sceptical, even if the buyer is friendly and the deal feels positive.

Ask for evidence. Not vague reassurance. Evidence.

For a company assignee, that might include recent accounts, management accounts, proof of funding, business plans, references and details of directors. For a new company, you may want personal guarantees, a rent deposit or other comfort. If the assignee is part of a group, check whether the trading entity is actually strong or whether value sits somewhere else.

This is especially important where the business being sold depends heavily on location. Restaurants, clinics, salons and retail units may have goodwill tied to the premises. Atalaw has separate guidance for commercial lease solicitors for restaurants and commercial lease solicitors for accountants, both of which show how different businesses can have very different lease risks.

Be clear about money on completion

Assignment usually involves more than signing the transfer document. There may be a purchase price, apportionments and deductions.

You should clarify:

• Rent paid in advance
• Service charge paid in advance
• Insurance rent
• VAT treatment
• Utility readings
• Business rates
• Rent deposit transfer or release
• Stock or asset purchase price
• Landlord legal fees
• Your own solicitor’s fees
• Any retention for disputed sums or repairs

If the deal includes a sale of business assets, the lease assignment should be coordinated with the asset purchase agreement. You do not want to transfer the lease but leave uncertainty over stock, equipment, employees, licences or deposits.

A simple example: you sell a small retail business and agree completion for Friday. The buyer assumes the rent deposit transfers to them. You assume it comes back to you. The landlord says the deposit must stay in place until replacement security is agreed. That one issue can delay completion or cause a dispute over thousands of pounds.

Assignment is not the same as subletting

Assignment transfers your lease interest to the assignee. Subletting creates a new lease under your existing lease, meaning you remain the tenant of your landlord and become landlord to the undertenant.

That difference matters.

Assignment may be better if you want to leave completely. Subletting may be better if you want to keep the lease but reduce cost. But subletting can leave you with management duties, rent collection risk and liability to your own landlord if the undertenant defaults.

Some leases allow one but restrict the other. Some allow subletting of the whole but not part. Some require the undertenant’s lease to mirror key terms of your lease.

If your position also involves residential tenants, mixed-use premises or possession issues, you may need linked advice from tenant eviction solicitors or Atalaw’s practical resources such as evidence landlords will need for possession, pets, deposits and rent-related reforms, ASB cases after reform and stress-testing arrears exposure.

Consider whether assignment is actually the best exit

Assignment is useful, but it is not always the cleanest option.

You may have other routes.

A break clause may allow you to end the lease early if you comply exactly with the conditions. A surrender may allow you to agree an exit with the landlord. Subletting may help where you want to preserve the lease. A company share sale may leave the tenant entity unchanged, although some leases contain change of control restrictions.

Each route has trade-offs.

A break clause may be cleaner, but only if the break date and notice requirements work. A surrender may be quicker, but the landlord may ask for a payment. Subletting may preserve flexibility, but you stay exposed. Assignment may unlock a business sale, but the AGA may keep you tied to the lease.

You should compare the options before deciding.

Check connected legal issues early

Commercial lease assignment can overlap with other areas of law. If you are selling a business, there may be employment, tax, licensing, insolvency or debt issues. If you are assigning because the business is under pressure, creditors may already be circling. If the lease is held personally but the business trades through a company, the structure needs careful attention.

For individuals and families, commercial premises can also connect with estate planning. If a lease forms part of a business you intend to pass on, you may need advice from will writing solicitors london or probate solicitors london where an estate is involved. Where capacity is a concern, Atalaw’s alzheimer will solicitors service may also be relevant.

For tenants who are dealing with property condition issues in another context, Atalaw’s housing disrepair services page may also help explain the firm’s wider property dispute work.

What outgoing tenants often get wrong

The most common mistake is assuming that assignment is just a handover. It is not. It is a legal transfer with continuing risk if the documents are not handled properly.

Outgoing tenants often run into problems because they:

• Agree commercial terms before reading the lease
• Promise the buyer completion by a fixed date before landlord consent is realistic
• Underestimate landlord legal costs
• Ignore repair and reinstatement obligations
• Sign an AGA without understanding the risk
• Accept a weak assignee because they want the deal done
• Forget service charge balancing payments
• Treat VAT as an afterthought
• Leave the licence to assign too late
• Do not coordinate the lease assignment with the business sale documents

None of these mistakes is unusual. They happen because business owners are often trying to move quickly. But speed without clarity can be expensive.

A practical example

Say you run a small restaurant in London. You have 4 years left on the lease. You want to sell because energy costs, staffing and supplier prices have squeezed margins. A buyer offers a fair price for the business and wants to complete in 6 weeks.

Before you agree, you check the lease. It says assignment requires landlord consent, the landlord can require an AGA, all rent and service charge must be paid up to date, and unauthorised alterations must be remedied. You then realise the extraction works were never formally approved, the service charge account is still open for the current year, and the buyer has only traded for 6 months through a new company.

That does not mean the deal is dead. It means you need to manage it properly. You may need retrospective consent for works, clearer financial information from the buyer, a negotiated rent deposit, a cap or clarification on costs, and careful AGA advice before you sign.

This is the kind of situation where early help from solicitors london businesses can speak to may prevent a rushed deal becoming a later dispute. You can also review Atalaw’s commercial leases category for related guidance.

FAQs

Can I assign my commercial lease without landlord consent?

It depends on the lease. If the lease does not restrict assignment, assignment may be possible without consent. In practice, most modern commercial leases do restrict assignment and require the landlord’s written consent through a licence to assign. You should not assume consent is unnecessary without checking the lease carefully.

Can a landlord refuse consent to assign?

A landlord may be able to refuse consent if the refusal is reasonable and connected to legitimate landlord and tenant concerns. Common reasons may include poor financial standing of the proposed assignee, existing lease breaches, concerns about the proposed use, or failure to provide enough information. The exact position depends on the lease and the facts.

Does assigning a lease release me from liability?

Not always. For many modern leases in England and Wales, the legal starting point may be that the outgoing tenant is released from future tenant covenants on lawful assignment. However, landlords commonly require an Authorised Guarantee Agreement as a condition of consent. If you sign an AGA, you may remain liable if the incoming tenant defaults.

Who pays the landlord’s legal fees for assignment?

The lease often says the tenant must pay the landlord’s reasonable legal and professional costs for considering and documenting consent. Sometimes the buyer agrees to cover these costs as part of the business sale. Make this clear in writing before costs are incurred.

How long does assigning a commercial lease take?

It depends on the lease, the landlord, the quality of the consent application and whether the assignee’s finances are straightforward. A simple assignment may move relatively quickly, but delays are common where information is missing, repairs are disputed, an AGA is negotiated, or several solicitors and agents are involved.

Is assignment better than surrender?

Not always. Assignment can work well if you have a strong incoming tenant and a buyer for the business. Surrender may be cleaner if the landlord is willing to take the premises back, but the landlord may ask for a payment or other terms. You should compare both routes before deciding.

Can I assign only part of the premises?

Most commercial leases do not allow assignment of part. Some may allow subletting of part with consent, but that is different from assignment. You need to check the alienation clause carefully before offering part of the premises to someone else.

What should I do before agreeing heads of terms with a buyer?

Review the lease, check assignment restrictions, identify landlord consent requirements, estimate costs, check repair obligations, ask for financial information from the buyer, and take legal advice before you promise a completion date. Atalaw’s commercial lease solicitors for tenants page explains why tenant-focused lease advice should deal with practical risk, not just paperwork.

Speak to Atalaw Solicitors

Assigning a commercial lease can be a sensible way to exit premises, sell a business or restructure your commitments. It can also leave you exposed if you sign before checking the detail.

Atalaw Solicitors can help you review your lease, prepare or respond to a consent application, negotiate the licence to assign, assess AGA risk, deal with repair or service charge issues and protect your position before completion.

For clear, practical advice, visit About Us or Contact Us to speak to Atalaw Solicitors about your commercial lease assignment.