tenant transfers and sub-lettings
Most tenants will want the right to transfer or sub-let their interest in a commercial lease. Unfortunately, commercial leases seldom allow them such a right, containing, instead, significant restrictions on tenants’ ability to do so. Why? Because most landlords want to keep a tight control on their choice of tenants and who is allowed to occupy the premises.
Whilst it is probably true that most landlords would prefer to keep their premises full and receive rent, landlords will not want just anyone in the premises if they think they run the risk of either the rent not being paid or of damage being caused to the premises. This consideration applies particularly to leases of prime properties such as units in major retail centres or multi-office buildings, where the landlords will be only too aware that the identity of the particular tenants in occupation can greatly add to the investment value of such properties.
Confusingly, the wording in most commercial leases might suggest that the landlords have only limited control over tenants’ ability to transfer (technically called “assign”) or sub-let premises. Typically, most leases will say that a landlord cannot unreasonably withhold consent to such a transfer or a sub-let. The difficulty is that landlords can very easily meet this test – they need do little more than give a reason – any reason - for refusal and they meet this test.
In practice, this means landlords have near complete control over tenants wanting to assign or sub-let premises. Unfortunately, many tenants may not always realise this and can easily run into difficulties, should the landlords not give consent. It makes good sense, then, for tenants negotiating leases to seek specific rights to be written into a lease. A sensible approach for tenants thinking of assigning/sub-letting is to make an informal initial approach to their landlords to see if they are likely to give consent or not. If the landlords appear unwilling to give consent, then a sensible next step would be for tenants to contact a specialist commercial property solicitor to explore the most promising ways of obtaining consent.