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Understanding the Costs of Lease Assignment: A Comprehensive Guide

Table of contents, the assignor, the assignee, the landlord, looking for a lawyer to handle assignment of a lease.

By the lawsuperstore team Updated 24 Aug, 2020

In most (but not all) cases, assignment of a lease will require the landlord’s approval of the incoming tenant. The extent of the landlord’s involvement, as well as factors such as the property’s rental value, cause variation in the costs of different lease assignments.

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The Importance of Registering a Lease Assignment in the UK

By Paul Loccisano Senior Associate

Updated on 24 May 2024 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

• Assignment  

Registering a Lease Assignment

Key takeaways, frequently asked questions.

A cornerstone provision in commercial lease agreements is the lease term. The lease term refers to the time period in which the commercial tenant agrees to occupy commercial premises. Commercial tenants, for a host of reasons, may need to exit their commercial lease sooner than they anticipated. Lease assignment is one of the most common ways for commercial tenants to exit their lease early . Commercial tenants, via this method, obtain their landlord’s consent to transfer the existing lease to another business owner. This can be beneficial for tenants who find themselves needing to downsize, relocate, or cease operations altogether. Additionally, landlords often prefer lease assignments over lease terminations as they ensure continued occupancy and rental income. This article will explain the importance of registering a lease assignment in the UK.

Assignment  

Commercial lease assignment is when a tenant transfers their existing lease to a new tenant. The existing tenant is the outgoing tenant or assignor, and the incoming tenant is the assignee. Lease assignment means that the commercial lease does not end, but the tenant is merely substituted. The assignee takes on all the outgoing tenant’s lease obligations and enjoys the tenant’s rights in the lease agreement. Ultimately, the incoming tenant will enjoy sole possession of the commercial property as their commercial premises. The incoming tenant will also start making rent payments for the commercial property.

The assignor starts the process of lease assignment. Leases between the outgoing tenant and the landlord that have less than several years before the conclusion of the lease term will need to go through a formal process of assignment. The assignor will need to execute a deed of assignment to transfer the lease to the incoming tenant.

The assignor or the assignee may need to register a lease assignment. The assignor or assignee may be required to register the lease assignment instead of using a deed of assignment. A lease assignment will generally need to be registered in two instances. The assignor will need to register the lease assignment if the commercial lease has seven years or more left on the lease term.

Also, the assignor is required to register the lease assignment if the lease has already been registered with the HM Land Registry Office . They must complete and submit a TR1 form to the HM Land Registry Office for a lease assignment to be valid. Once the Land Registry receives this, they will process the lease assignment and place the incoming tenant’s name as the titleholder to the lease in the Land Register. 

Importance of Registering a Lease Assignment

When you enter or exit a commercial lease through assignment, the process of registering the lease assignment is a crucial part of assigning a lease. This is because until this is complete, the assignee is not legally the new tenant for the commercial lease. Therefore, the lease assignment process is not fully complete. The assignor’s failure to register the lease assignment with the Land Registry Office adversely impacts the assignee. Due to the lease assignment process not being legally complete, the assignee has none of the rights usually granted to them in a commercial lease. The assignee will not have the right to sole occupation of the commercial premises. The assignor will also continue to be responsible for all the lease obligations in the commercial lease agreement. Had the lease assignment been validly registered, the assignee would be responsible for the lease obligations after that.

It is essential to have a solicitor to see you through the lease assignment process. The outgoing tenant’s solicitor will usually draft the transfer for the Land Registry Office. However, you, as the assignee, will want your solicitor to confirm the lease assignment is correct and complete.

Land registration is time-consuming. The assignor should register the lease assignment as soon as possible. Legal rules concerning the timeframe for registration of a lease assignment also impact the practicality of registering land. As the assignor, you can only register the lease assignment for up to two months from the lease completion date. The law will deem the lease to be void if not registered within this timeframe. You are then reliant on a discretionary agreement with the Land Registrar. The Land Registrar may extend the timeframe for you to register the lease with the use of an order.

Break Clause Within a Commercial Lease

The assignor needs to register the lease assignment with the Land Registry Office. The assignor’s act of registering the lease assignment ensures the law considers the lease assignment process to be complete. Further, the assignor registering the lease assignment protects the incoming tenant’s ability to rely on a break notice provision in the commercial lease agreement. A break clause simply allows the incoming commercial tenant to terminate the lease agreement before the lease term ends. The assignor typically needs to register the commercial lease assignment for the incoming tenant to rely on the break clause.

If the assignor has not registered the lease assignment with the Land Registry Office, the incoming tenant will be left in a precarious position. The assignee may need to end the lease early but cannot rely on the break clause. 

This cheat sheet outlines what you should be aware of in your lease agreement.

Lease assignment is where a commercial lease transfers from the existing commercial tenant to a new tenant. The assignor must register the lease assignment with the Land Registry Office in two situations. Where the commercial lease being assigned has seven years or more left on the lease term, the lease assignment will need to be registered. Likewise, registration of a lease assignment is required if the commercial lease is registered. Registration of a lease assignment is essential for assigning a commercial lease. Without it, the assignment is not legal, and it is crucial that registering the lease assignment is done within the correct time frame. Registering a lease assignment may also allow the assignee to exercise the break clause in the lease agreement if necessary. 

If you need help understanding the importance of registering a lease assignment in the UK, contact our experienced leasing lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page .

Lease assignment is where the existing tenant to a commercial lease, the assignor,  transfers it to a new tenant, the assignee. The lease continues between the assignee and the current commercial landlord.

Registering a lease assignment is often part of the lease assignment process and requires a TR1 form to be completed with the Land Registry Office.

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Assignment of Lease Explained

• December 1, 2023

Understanding the complexities surrounding the assignment of a lease is crucial for both tenants and landlords. Within the UK, various situations might compel a tenant to transfer their lease to another party. In this guide we will delve into the essentials, helping you understand every facet of a lease assignment.

What is an Assignment of Lease?

In the world of property management and real estate, the concept of an “assignment of lease” is fundamental. It involves a tenant, known as the assignor, transferring their entire legal interest in a property to another individual or entity, called the assignee. This process is common in both residential and commercial contexts and plays a significant role in maintaining the fluidity of property interests, especially in a dynamic market.

When a tenant signs a lease, they agree to specific commitments, including paying rent and maintaining the property, which are enforceable for a set period. However, various circumstances may prompt a tenant to vacate the property before the lease term expires. Herein lies the importance of the assignment of lease.

Through lease assignment, the original tenant can exit the property and pass on the responsibility to a third party, who then assumes the role of the tenant with all its incumbent responsibilities. It’s important to note that while the new tenant steps into the shoes of the original tenant, the lease terms remain unchanged.

For instance, if an individual rents a flat and later decides to move out before the lease’s expiration due to reasons such as relocating for a job or changing living situations, they may opt for an assignment of the lease. This strategy allows another person to take over the living space and adhere to the responsibilities under the original lease, ensuring that the flat does not remain unoccupied and the landlord continues to receive rent payments. This seamless transition can be especially beneficial in residential areas with high demand for housing, as it minimises financial instability for the landlord and provides immediate accommodation for those in need of a home.

Key Components of Lease Assignment

• Assignor and Assignee: The existing tenant (assignor) and the new tenant (assignee) are the primary parties in this agreement. Their willingness to transfer and assume the lease’s obligations, respectively, drives the assignment process.
• Landlord’s Role: While not a direct party to the assignment, the landlord plays a pivotal role. Most lease agreements stipulate that landlords must provide consent before any assignment takes place. This clause protects the landlord’s interests, ensuring the new tenant is reliable and meets the required standards.
• Legal Documentation: The process requires several legal documents, including the initial lease agreement and a deed of assignment. The latter must clearly articulate that all rights and responsibilities have been transferred to the new tenant. This precision prevents future disputes regarding the terms of the lease.
• Liabilities: The assignment of lease doesn’t inherently absolve the original tenant of responsibilities. Depending on the agreement’s terms, the assignor might remain liable if the assignee fails to fulfil the lease obligations. This potential continued liability underscores the importance of thorough assignee vetting.

The Legal Ground

The legality surrounding the assignment of a lease is rooted in UK property law. It necessitates compliance with various statutory requirements and often involves complex legal procedures. Consequently, parties usually engage solicitors to ensure that the assignment aligns with legal protocols, protecting the interests of all involved parties.

The assignment of a lease is a nuanced process, influenced by factors unique to each situation. Whether prompted by personal, business, or financial changes, lease assignments facilitate flexibility in property occupancy and use. Understanding this concept is crucial for tenants seeking an early exit from a lease, individuals looking for established lease properties, and landlords wishing to maintain continuous tenancy and income streams.

Understanding the Deed of Assignment of Tenancy

A “deed of assignment tenancy” is a legal document that evidences the transfer of lease obligations from the current tenant to another. It is an essential part of the lease assignment process, binding the new tenant to the terms stated in the original lease.

Landlord’s Checks Before Permitting Assignment of a Lease

The assignment of a lease, while beneficial in maintaining continuous occupancy and consistent rent payments, necessitates thorough due diligence on the part of the landlord. Before consenting to an assignment, it’s imperative for landlords to conduct comprehensive checks, mirroring the depth of evaluation done during the initial tenant screening process. These checks are crucial in mitigating potential risks and safeguarding the landlord’s investment.

Detailed Assessment of the Prospective Assignee

Landlords should ascertain the financial stability and reliability of the assignee. This assessment often involves:

• Credit Checks: This allows landlords to have a clearer understanding of the prospective assignee’s credit history, highlighting their ability to keep up with regular rent payments and financial commitments.
• Employment Verification: Landlords typically require proof of ongoing, stable employment. This verification helps ensure that the new tenant has a consistent income stream capable of covering the rent and other associated costs.
• References: Previous landlords or property managers can provide insights into the assignee’s behaviour, paying habits, and overall reliability. Personal references might also be necessary to form a more comprehensive view of the prospective tenant.

Review of the Assignee’s Intent

Understanding the prospective tenant’s reasons for seeking the property and their long-term intentions can provide reassurance. For instance, landlords should feel more comfortable knowing that the assignee plans to reside in the property for an extended period and doesn’t intend to sublet without permission or engage in unlawful activities.

Examination of Financial Documentation

Landlords may request documentation such as bank statements or savings accounts to further verify the assignee’s ability to afford the property. This scrutiny is particularly pertinent in higher-rent areas or for properties with higher maintenance costs.

Ensuring Contractual Compliance

It’s important for the landlord to confirm that the assignee understands and agrees to the terms set out in the original lease. The assignee must comply with all existing conditions, and any deviation needs to be negotiated with and approved by the landlord.

Legal Considerations

Given the legal complexities surrounding lease assignments, landlords often seek legal advice during this process. Lawyers can help ensure that the assignment adheres to local property laws, the original lease’s terms, and that the landlord’s interests are thoroughly protected throughout the transition.

By conducting these comprehensive checks, a landlord exercises due diligence, significantly reducing the likelihood of issues arising from the assignment of the lease. This meticulous approach helps maintain the property’s revenue stream, upholds community standards, and ensures the continued preservation and value of the property investment. It’s a proactive measure, providing the landlord with peace of mind that they are handing over their property to a reliable and responsible assignee.

Costs Involved in Lease Assignment

The process of lease assignment, while a practical solution for tenants looking to transfer their lease obligations, does entail various costs that both the assignor (original tenant) and assignee (new tenant) need to consider. These expenses contribute to a seamless transfer process, ensuring all legalities are properly managed, and all parties are adequately protected. Understanding these costs is essential as it prevents unexpected surprises and allows for a more transparent transaction.

Costs for the Assignor

• Advertising Costs: If the landlord does not immediately have a new tenant, the original tenant may need to advertise the property. This could involve online listings, printed materials, or hiring an estate agent to expedite the process, all of which incur costs.
• Tenant Screening Costs: The assignor might opt to conduct preliminary screenings of potential assignees, which include credit checks, reference checks, and other background investigations to ensure they’re presenting a reliable tenant to the landlord.
• Legal Fees: The legal intricacies of transferring a lease require the involvement of legal professionals. The assignor typically bears the cost for legal consultations, drafting the deed of assignment, and any related legal documentation.
• Landlord’s Administrative Fees: Some landlords charge an administrative fee for processing a lease assignment, covering the time and resources they expend to conduct their checks and modify their records.
• Potential Liability Costs: If the assignee fails to meet the lease obligations, and depending on the terms of the assignment, the original tenant may remain partially liable. This contingent liability could lead to future costs.

Costs for the Assignee

• Security Deposit: It’s standard practice for the new tenant to provide a security deposit before moving in. In some cases, the assignee reimburses the original tenant for the initial deposit, depending on its condition and any agreement between the parties.
• Advance Rent: The assignee may need to pay the first month’s rent in advance, similar to standard leasing arrangements.
• Legal Fees: Assignees also incur legal fees. They need legal counsel to review the terms of the lease, ensure the assignment is conducted correctly, and understand their new responsibilities and liabilities.
• Stamp Duty: Depending on the property’s value and the lease’s remaining duration, the assignee might need to pay Stamp Duty Land Tax (SDLT) on the premium or the rent of the lease.

Shared Costs

In some instances, both parties negotiate and equally share specific costs, such as those for legal consultations, to ensure fairness and mutual satisfaction in proceeding with the transaction.

Both assignors and assignees must factor in these expenses to accurately assess whether a lease assignment is a financially viable option. It is advisable to consult with real estate professionals and legal advisors to understand all potential charges fully. Having a clear, upfront understanding of these costs allows both parties to make informed decisions, ensuring a smooth, transparent, and fair transition process.

Does Assignment Create a New Tenancy?

No, an assignment does not create a new tenancy. It merely transfers the existing tenant’s rights and obligations to the new tenant, who then steps into the shoes of the original tenant under the same lease terms.

The Necessity of Legal Assistance

It is highly advisable to engage a solicitor during the assignment of a lease. A solicitor can provide necessary legal advice, prepare the deed of assignment of lease, and ensure compliance with various property and contract laws.

Deed of Assignment vs Tenancy Agreement

While they might sound similar, a deed of assignment is not the same as a tenancy agreement. The former refers to the document transferring existing lease rights to a new tenant, while the latter is a contract outlining the terms between a landlord and tenant for new occupancy.

Parties Involved in Signing the Deed of Assignment

The deed of assignment of lease is typically signed by the outgoing tenant, the incoming tenant, and sometimes, the landlord, especially when their consent is a prerequisite for the lease transfer.

Landlord’s Consent to Lease Assignment

A landlord can refuse to consent to assign a lease, but this refusal must be reasonable. Scenarios for justifiable refusal might include the prospective tenant’s inability to meet financial commitments or proposed use of the property that violates lease terms.

Lease Assignment vs Subletting

• Lease assignment involves the complete transfer of the tenant’s rights to another party.
• Subletting occurs when the tenant temporarily hands over the property rights to another party but retains some rights or eventually plans to return.

Financial Responsibilities in Lease Assignment

Typically, the outgoing tenant or the incoming tenant covers the costs related to the assignment of lease, such as legal fees, administrative charges, and any leasehold improvements. The specific arrangements may vary based on mutual agreements.

Assigning a Lease Without a Deed: Is It Possible?

No, a lease assignment must be evidenced by a deed to be legally binding. The deed of assignment tenancy is crucial as it protects the interests of all parties involved and provides legal clarity.

The Meaning of ‘Assignment’ in Rent Context

In the context of renting, ‘assignment’ refers to transferring the existing tenant’s lease obligations and rights to another party. The assignee assumes responsibility for rent payments and adherence to the lease terms.

Advantages of Assigning a Lease

There are several benefits associated with the assignment of a lease, including:

• Flexibility for the tenant needing to vacate the property before lease termination.
• Minimal interruption in rent payments for the landlord.
• Opportunity for another tenant to occupy the premises without having to negotiate a new lease.

Stamp Duty and Lease Assignment

Stamp duty on assignment of lease may apply depending on the premium paid and the lease’s yearly rent. It’s important to consult a solicitor to understand any potential tax implications.

Post-Assignment Liabilities for Tenants

After the assignment of a lease, the original tenant is generally released from future liabilities. However, they may remain liable if the new tenant defaults, depending on specific lease terms or if guarantees were provided.

Essential Documents for Lease Assignment

In the process of a lease assignment, several critical documents must be prepared, reviewed, and signed to ensure a legally binding transfer of rights and responsibilities from the original tenant (assignor) to the new tenant (assignee). These documents are crucial in defining the terms of the assignment, protecting the interests of all parties involved, and complying with legal standards. Here are the essential documents required for a successful lease assignment:

1. The Original Lease Agreement

• Before any transfer, all parties must review the original lease. It’s vital to understand any clauses or terms that could impact the assignment, such as conditions requiring the landlord’s consent for any lease transfer.
• The original lease agreement serves as the foundation for the assignment, outlining the terms and obligations that the assignee will need to adhere to.

2. Deed of Assignment of Lease

• This legal document formally transfers the lease obligations from the assignor to the assignee. It must clearly state the terms under which the lease is assigned, including any continuing liabilities of the assignor, if applicable.
• It should be comprehensive, detailing the rights and responsibilities of all parties and any guarantees provided by the assignor.
• The deed is usually drafted by a solicitor to ensure that it complies with legal standards and adequately protects everyone’s interests.

3. Landlord’s Consent to Assignment

• Most leases require the landlord’s formal approval for any assignment to occur. This document is the landlord’s written agreement, permitting the transfer from the current tenant to the new one.
• It may come with conditions the assignee must satisfy, which should be clearly outlined in the consent form.

4. Assignee’s Letter of Acceptance

• This document is proof that the assignee understands and agrees to the terms set out in the original lease and the deed of assignment.
• The letter may restate key lease terms for clarity and will affirm the assignee’s commitment to abide by all the lease conditions and responsibilities.

5. Legal Advisories

• Though not a formal part of the lease assignment, documentation of legal advice received by both the assignor and assignee (and possibly the landlord) is crucial.
• These advisories ensure each party has been informed of their legal rights and obligations, potentially offering protection in the event of future disputes.

6. Inventory List

• If relevant, an inventory list detailing the condition of the property, especially for furnished rentals, would be necessary. This document helps manage expectations and responsibilities concerning the property’s state and contents at the time of the assignment.

7. Proof of Assignee’s Financial Stability

• While not always formally part of the assignment documentation, evidence of the assignee’s ability to meet financial commitments (like bank statements or employment confirmation) often needs to be submitted to the landlord during the assignment process.

The process of assigning a lease is a complex legal transaction that requires strict adherence to procedural standards. These essential documents ensure that the assignment progresses smoothly, with clear understanding and agreement from all parties involved. Both assignor and assignee should seek legal counsel to ensure their interests are protected, and all documents are in order, further underscoring the importance of each document’s role in this pivotal real estate process.

Energy Performance Certificate (EPC) Requirements

Yes, an EPC is generally required for a lease assignment, especially if the building is to be sold or rented out. This certificate ensures that the property meets the necessary energy efficiency standards.

Registering an Assignment of Lease

Registration of an assignment of lease is crucial. It validates the change of tenant under the lease, making it legally binding and enforceable. This process usually involves submitting the deed of assignment to the appropriate land registry.

Timeframe for Assigning a Lease

Assigning a lease can take anywhere from a few weeks to several months, depending on factors like obtaining the landlord’s consent, the new tenant’s credibility, and the speed of legal processes.

Embracing the Benefits of Lease Assignment

Whether you’re a tenant seeking flexibility or a landlord desiring continued occupancy, lease assignment offers solutions that can cater to your individual needs, promoting ease and continuity in the leasing process.

If you’re considering a lease assignment, it’s paramount to seek professional advice to navigate the complexities involved. The information contained in this article should be used for information purposes only and should not be relied upon in place of specific legal advice.

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The importance of registering a lease assignment in the UK

Contributor.

A cornerstone provision in commercial lease agreements is the lease term. The lease term refers to the time period in which the commercial tenant agrees to occupy commercial premises. Commercial tenants, for a host of reasons, may need to exit their commercial lease sooner than they anticipated. Lease assignment is one of the most common ways for commercial tenants to exit their lease early . Commercial tenants, via this method, obtain their landlord's consent to transfer the existing lease to another business owner. This article will explain the importance of registering a lease assignment in the UK.

Commercial lease assignment is when a tenant transfers their existing lease to a new tenant. The existing tenant is the outgoing tenant or assignor, and the incoming tenant is the assignee. Lease assignment means that the commercial lease does not end but the tenant is merely substituted. The assignee takes on all the outgoing tenant's lease obligations and enjoys the tenant's rights in the lease agreement. Ultimately, the incoming tenant will enjoy sole possession of the commercial property as their commercial premises. The incoming tenant will also start making rent payments for the commercial property.

The assignor starts the process of lease assignment. Leases between the outgoing tenant and the landlord which have less than several years before the conclusion of the lease term will need to go through a formal process of assignment. The assignor will need to execute a deed of assignment to transfer the lease to the incoming tenant.

Registering a Lease Assignment

The assignor or the assignee may need to register a lease assignment. The assignor or assignee may be required to register the lease assignment instead of using a deed of assignment. A lease assignment will generally need to be registered in two instances. The assignor will need to register the lease assignment if the commercial lease has seven years or more left on the lease term.

Also, the assignor is required to register the lease assignment if the lease has already been registered with the HM Land Registry Office . They must complete and submit a TR1 form to the HM Land Registry Office for a lease assignment to be valid. Once the Land Registry receives this, they will process the lease assignment and place the incoming tenant's name as the titleholder to the lease in the Land Register.

Importance of Registering a Lease Assignment

When you enter or exit a commercial lease through assignment, the process of registering the lease assignment is a crucial part of assigning a lease. This is because until this is complete, the assignee is not legally the new tenant for the commercial lease. Therefore, the lease assignment process is not fully complete. The assignor's failure to register the lease assignment with the Land Registry Office adversely impacts the assignee. Due to the lease assignment process not being legally complete, the assignee has none of the rights usually granted to them in a commercial lease. The assignee will not have the right to sole occupation of the commercial premises. The assignor will also continue to be responsible for all the lease obligations in the commercial lease agreement. Had the lease assignment been validly registered, the assignee would be responsible for the lease obligations thereafter.

It is essential to have a solicitor to see you through the lease assignment process. The outgoing tenant's solicitor will usually draft the transfer for the Land Registry Office. However, you as the assignee will want your solicitor to confirm the lease assignment is correct and complete.

Land registration is time-consuming. The assignor should register the lease assignment as soon as possible. Legal rules concerning the timeframe for registration of a lease assignment also impact the expediency of registering land. As the assignor, you can only register the lease assignment for up to two months from the lease completion date. The law will deem the lease to be void if not registered within this timeframe. You are then reliant on a discretionary agreement with the Land Registrar. The Land Registrar may extend the timeframe for you to register the lease with the use of an order.

Break Clause Within a Commercial Lease

It is important for the assignor to register the lease assignment with the Land Registry Office. The assignor's act of registering the lease assignment ensures the law considers the lease assignment process to be complete. Further, the assignor registering the lease assignment protects the incoming tenant's ability to rely on a break notice provision in the commercial lease agreement. A break clause simply allows the incoming commercial tenant to terminate the lease agreement before the lease term ends. The assignor typically needs to register the commercial lease assignment for the incoming tenant to rely on the break clause.

If the assignor has not registered the lease assignment with the Land Registry Office, the incoming tenant will be left in a precarious position. The assignee may need to end the lease early but cannot rely on the break clause.

Key Takeaways

Lease assignment is where commercial lease transfers from the existing commercial tenant to a new tenant. The assignor must register the lease assignment with the Land Registry Office in two situations. Where the commercial lease being assigned has seven years or more left on the lease term, the lease assignment will need to be registered. Likewise, registration of a lease assignment is required if the commercial lease is registered. Registration of a lease assignment is essential for assigning a commercial lease. Without it, the assignment is not legal, and it is crucial that registering the lease assignment is done within the correct time frame. Registering a lease assignment may also allow the assignee to exercise the break clause in the lease agreement if necessary.

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Licence To Assign Land Registry

Blackstone Solicitors recognises that property ownership and management involve various legal considerations. When dealing with leasehold interests, understanding the role of a licence to assign and its interaction with the Land Registry in England and Wales is crucial. In this article, Licence To Assign Land Registry, we take a look at the process and mechanism involved.

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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of commercial leases, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on  0345 901 0445  or click here to make a free enquiry   and a member of the team will get back to you.

What is a Licence to Assign?

A licence to assign is a formal permission granted by a landlord to a tenant in a lease agreement. It allows the tenant (assignor) to transfer their rights and obligations under the lease to a new tenant (assignee). Most commercial leases in England and Wales typically include a clause prohibiting lease assignment without the landlord’s consent. A licence to assign serves as a written document acknowledging the landlord’s approval for the specific proposed assignment.

Why is a Licence to Assign Important for Land Registry Considerations?

While a licence to assign is a contractual agreement between the landlord and tenant, it doesn’t directly affect the Land Registry record. The Land Registry reflects the ownership structure of the property, with the landlord remaining the registered owner of the freehold title. However, the process of assigning a registered lease and updating the Land Registry record often hinges on the existence of a valid licence to assign.

Land Registry Considerations for Lease Assignments

The Land Registry plays a crucial role in formally transferring the leasehold interest to the new tenant. Here’s how the Land Registry factors into the process:

• Registration Requirements: Commercial leases with a term exceeding seven years from the granting date must be registered with the Land Registry. This applies to both the initial lease and any subsequent assignments.
• Assignment Formalities: To register the lease assignment, a formal transfer document needs to be submitted to the Land Registry. This document typically references the licence to assign, demonstrating the landlord’s consent for the transfer.
• Land Registry Fees: There are associated fees for registering a lease assignment with the Land Registry. These fees vary depending on the value of the property and the complexity of the transaction.

Impact of a Licence to Assign on the Assignment Process

The presence of a valid licence to assign streamlines the process of registering a lease assignment with the Land Registry:

• Facilitates Registration: With a licence to assign in place, the Land Registry has clear evidence of the landlord’s permission for the transfer, expediting the registration process.
• Protects Assignee: A registered assignment provides the new tenant (assignee) with a secure and publicly verifiable record of their leasehold interest.
• Avoids Potential Disputes: A licence to assign helps mitigate potential disputes between the landlord, tenant, and assignee regarding the validity of the lease transfer.

Blackstone Solicitors: Your Partner in Effective Lease Assignments

Blackstone Solicitors can guide you through the intricacies of assigning a registered lease and navigating the Land Registry procedures. We can assist you with:

• Reviewing Your Lease Agreement: Our team will thoroughly examine your lease to understand the provisions regarding assignment and any potential restrictions related to obtaining a licence to assign.
• Negotiating the Assignment: Blackstone Solicitors can represent you during negotiations with the assignee, ensuring a fair and balanced agreement that protects your interests as the tenant.
• Obtaining a Licence to Assign: We can communicate with the landlord and draft a compelling request for a licence to assign, outlining the benefits of the proposed assignment.
• Land Registry Procedures: Our solicitors will guide you through the process of registering the lease assignment with the Land Registry, ensuring all necessary documents are filed accurately.

Contact Blackstone Solicitors Today

Assigning a registered lease can involve complex legal and administrative steps. Blackstone Solicitors can provide expert legal guidance throughout the process, ensuring a smooth transition for all parties involved and a successful update of the Land Registry record.

Additional Considerations

• Landlord’s Refusal: Landlords are not obligated to grant a licence to assign. Understanding the reasons for refusal can help you address their concerns or potentially reach a compromise.
• Costs Involved: Be prepared for potential costs associated with the assignment process, including legal fees, a licence to assign fee (if applicable), Land Registry fees, and valuation costs for the property.
• Transparency and Communication: Maintaining open communication with your landlord, the assignee, and the Land Registry is crucial throughout the process for a smooth and efficient lease assignment.

By understanding the interplay between licences to assign and the Land Registry, parties involved in lease transfers in England and Wales can approach the process with clarity and confidence. Blackstone Solicitors is here to guide you through the legalities and ensure a successful outcome that protects your interests.

How we can help

We have a proven track record of helping clients deal with the legal aspects of commercial leases. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Commercial Property Solicitors

It is important for you to be well informed about the issues and possible implications of commercial leases. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.

To speak to our Commercial Property solicitors today, simply call us on  0345 901 0445 , or click here to make a free enquiry . We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.

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What is an Assignment of Lease?

An Assignment of Lease is a Deed that is executed by the Landlord of a property in which he agrees to transfer the Lease from an existing tenant to another tenant. It is chiefly used where the property is leasehold and has not yet been registered, and has a large capital value, e.g. where a lesehold property is being sold. In practice the landlord is the vendor of a leasehold property, and the assignee is the purchaser.

An assignment is a handy document to obtain a copy of if you require details of past ownerships or purchase prices of a property. It contains the names and addresses of the parties to the lease, the outgoing tenant and the incoming tenant. The term (length) of the lease also appears, and the number of years remaining in the term. The yearly rent payable and any apportionments will also be referred to, and the consideration (amount paid) for the assignment. There may be fresh covenants and/or easements, details of which will also appear.

Often the Deed will contain a recital detailing previous history of ownership, reasons for new covenants or easements, etc.

Although we are discussing landlords and tenants here, in reality the landlord is the vendor and the assignee is the purchaser. The terms assignment, assignor and assignee are confusingly used because the property is leasehold. If the property were freehold they would not be used.

An assignment is usually found within the bundle of pre-registration deeds and documents for a leasehold property and forming part of the current or former root of title, being one of the documents in the chain. Once the property is registered there is no need to draw a Deed of Assignment for future purchases, but the Land Registry will retain a copy of any such forwarded to it on first registration if they add significantly to the title information. Where this is the case the Land Registry will add a note memo to the end of any clause in the Title Register that refers to the Assignment, to say a copy has been retained. A copy can then be obtained using our Associated Documents Search .

This is a service we provide whereby for a fee of £29.95 you can obtain a copy of all Deeds and Documents that have been copied by the Land Registry and held in any one Title. If this includes an Assignment of a Lease that will be included.

Deeds creating Restrictions, Covenants, Easements, etc. are often kept digitally by the Land Registry and made available for sale due to their invaluable detail and content to assist in further understanding the Restrictions, etc.

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Assigning a commercial property lease to another business.

To grow or react to market conditions your business may need to quickly leave its current premises. If your business rents the premises but there is still time left to run on the lease, what can you do?

A common solution is to transfer your lease to someone else. This process is called ‘assigning a lease’. In this article, we describe how this process operates and what potential problems you may need to overcome. If you need help in this area, our friendly  commercial property experts  can help.

How to assign a lease

‘Assigning’ a lease simply means transferring your lease to another person so that they become the new tenant. Once the assignment has taken place the lease continues to exist and the new tenant becomes liable for all of the tenant’s obligations in the lease.

The first step is to find someone who may want to take over the lease (they are known as ‘the assignee’). Aside from being happy with the rent that is being charged, the assignee will want to review the lease to ensure that it does not contain any onerous or unacceptable terms. This process will be very similar to the one your solicitor carried out when you negotiated the lease in the first place, except that as the assignee will be taking over the existing lease, they will have little or no opportunity to change its terms and will have to be happy with it as it stands.

If the lease contains terms which are generally unacceptable in commercial property leases or terms that will affect the ability of the new tenant to use the property as they wish, you may have problems in assigning the property. It is worth knowing before you start marketing your lease just what it does or does not allow. For example, it is no good marketing a warehouse to factory owners if it specifically forbids industrial use.

Most tenants will want to carry out the same due diligence process as if it were purchasing a commercial property or negotiating the lease at the outset. This usually involves raising queries with the local authority and utility companies as well as finding out about environmental and similar issues. This takes time so do not expect to be able to transfer the lease instantly.

The second step, once an assignee is found and they are happy to take on the lease, is to transfer (‘assign’) the lease. This will be done using a  Land Registry form known as a TR1 . If the lease is for less than 7 years, then the lease can be assigned by using a deed of assignment. Both these documents have the same effect and will generally be executed by both you as the current tenant and the assignee.

You can assign your lease to whoever and whenever you like. Most landlords are not willing to allow the tenant such freedom and often write into the lease restrictions on to whom a lease can be assigned and on what basis. In most cases, the landlord will be required to consent to the assignment before it can go ahead. This is where most of the practical problems arise as we explore in more detail below.

When and why to assign a lease

A tenant will generally look to assign its lease when it no longer requires use of the property but there is still some time before the lease comes to an end. For example, your business may have taken a five-year lease, but after two years you need to move. Unless the lease includes  break clauses , you would have to continue to pay the rent and comply with the lease terms for the remaining three years of the lease term. By assigning the lease you can dispose of or at the very least reduce that liability. 

If there is less than a year remaining of the lease to run, it may be more difficult to find someone who wants to take the lease for a short period of time, so in those circumstances, it may be worth continuing to trade from the existing property until the lease comes to an end itself.

A few common examples of why you may wish to assign your lease are that:

• You may have agreed to sell your business and the structure of the transaction requires the lease to be assigned to the purchasers;
• Your business may not be trading as well as you had hoped and you are unable to keep up with rent payments or you may simply need smaller premises;
• You may find that the property is no longer situated in a convenient place and may want to relocate the business; or
• Your business may have grown faster than anticipated and requires bigger premises from which to trade.

Is a licence to assign needed to transfer a commercial lease?

A licence to assign is the document used to evidence that the landlord has granted its consent to an assignment as required. Most landlords are primarily concerned with the income they earn from the properties they rent out. It is important to them that the tenants they rent to:

• Are able to pay the rent in full and on time;
• Keep the property in a good state of repair so that the property can be easily relet when the tenant leaves; and
• Behave in such a way as not to adversely affect the landlord’s ability to rent other properties it may own nearby.

It is for this reason that most landlords will seek to control who you can assign your lease to and prevent you from assigning your lease without your landlord’s consent.

Do you need the landlord’s consent to assign a commercial lease?

Whether your landlord’s consent to an assignment (by way of a licence to assign) is required depends on the terms of the lease you are seeking to assign. Most leases will have some restrictions. It is only if the lease does not include any restriction on assignment or includes restrictions but no requirement to obtain the landlord’s consent to an assignment, that no licence to assign will be required.

Although the detailed provisions can look intimidating, most assignment clauses simply require the landlord to agree that it believes the assignee to be able to meet its obligations and if it does so to formally consent to the assignment. The landlord is also usually required by statute not to unreasonably withhold or delay giving that consent.

Note: if you feel your landlord is not co-operating, you should explore the options for tenants in our article on  landlords unreasonably withholding consent .

You should ask for the landlord’s consent as soon as possible so as not to delay matters, as the landlord only has to deal with your request within a reasonable time and even then, only once you have provided all the information the landlord needs to reach its decision on whether or not to give its consent. This may include evidence of your assignee’s good standing such as bank and previous landlord references, and copies of audited accounts and bank statements.

If your proposed assignee is not of sufficient standing to satisfy the landlord consent may be granted if the assignee agrees to provide a guarantor for its liabilities or a rent deposit that can then be used if it fails to pay. What the landlord is permitted to insist on will depend on the specific wording of the lease and the specific set of circumstances.

You should also be aware that most landlords will insist that whatever the financial state of the assignee, you, as the outgoing tenant, will be required to guarantee the assignee’s obligations under the lease by what is called an authorised guarantee agreement. You should not make the error of assuming that by assigning your lease you can just walk away from any responsibility. The one thing that the law requires you to do is to find someone who can pay the rent and comply with the lease terms. If you do not do this, then the landlord will be able to recover any arrears from you.

If your lease expressly prohibits assignments without containing a requirement for consent to be given by the Landlord, then the starting point is that you cannot assign it at all. The landlord may still agree to an assignment taking place. This would still be documented by way of a licence to assign but in this case, the landlord would be under no obligation to grant its consent even if it would be reasonable to do so or to act promptly when considering your request to give that consent.

Actual assignments and virtual assignments

Most transfers of the ownership of a lease are carried out by an ‘actual assignment’ where the tenant assigns its interest in the lease to an assignee as explained above.

In a few cases you may seek to use a virtual assignment whereby you remain liable under the terms of the lease, but enter into a contract with a third-party transferring the economic benefits and burdens of the lease, without actually assigning the lease itself. These can be used when the lease contains overly restrictive assignment clauses. You could, for example, declare a trust or enter into a contract in favour of a third-party, effectively transferring the economic benefits and burdens of the lease to them. Beware of clauses in the lease which prevent this sort of arrangement.

If a tenant is a company and the shares in that company are transferred to someone else, then the lease would remain unaffected and the tenant would still be the company. Although not strictly a virtual assignment this change of ownership can be a concern to some landlords and as a result, some leases include express provisions restricting changes in the shareholding of the tenant company.

Registering a commercial lease assignment

If the lease is registered at the Land Registry or has more than 7 years of its term remaining, and you are the assignee, you must register the assignment at the Land Registry. The Land Registry will then process the application and update the title register for the lease so that it is in your name.

The assignee must register the lease as, until it does, the assignment is not fully complete and legally you have not yet become the tenant. This has practical implications as, depending on the wording of the lease, you may not be able to serve a valid break notice until it is registered at the Land Registry. As registration can in some circumstances take a long time, you may find yourself unable to end the lease when you expected. If you forget to register you are unlikely to complete your registration in time to take the steps you need to take.

If you do not apply for registration within 2 months of the date of completion of the lease, the lease becomes void and can only be registered if the Land Registrar agrees to make an order extending the 2 month period.

In addition to registering the lease with the Land Registry most leases include an obligation to notify the landlord that an assignment has taken place and to send them a copy of the assignment document and pay them a fee for noting the transaction. Sometimes the lease sets out the specific notice fee, but often the lease merely sets out a minimum fee. In that case, you should ask the landlord to confirm the notice fee before completing the assignment.

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The effect of an assignment on a lease

Once a lease has been assigned, the assignee steps into the shoes of the tenant and all the rights and duties that the previous tenant had passed over to the new tenant. Occasionally there are rights in the lease which are personal to the original tenant. This often affects the break clause. If the right to end the lease early is personal to the original tenant, you cannot do so if the lease is assigned.

As most leases require the previous tenant to guarantee the performance of the new tenant, the assignment also has the effect of rearranging the liabilities for payment of the rent. Any previous guarantor under an authorised guarantee agreement will have been automatically released by the assignment and rent deposits may become repayable by the landlord.

Assignment v sub-letting

Is it better to assign a lease or sub-let it? The answer very much depends on your specific requirements and circumstances.

Assigning the lease means that you no longer have any interest in the property. It is quite common that a tenant will still remain ‘on the hook’ for the lease obligations after an assignment, as the landlord will likely have insisted that they enter into an authorised guarantee agreement to guarantee the assignee complies with the lease. A landlord will not always insist on an authorised guarantee agreement and, even if one is in place, the obligations on it cease if/when the assignee assigns the lease itself to another party. Most tenants regard an assignment as the best option where they have no current use or interest in the property and do not think they will do so at any point in the future.

You may have to keep the lease in your name if you wish to rely on any personal rights in the lease by granting a sub-lease. This will allow you to retain your interest in the lease, but it also means that you are still liable to pay the rent due under the lease and comply with all of the lease obligations. As the sub-tenant is likely to be in occupation of all or part of the property, you must manage them to ensure that the sub-tenant does not place you in breach of your duties under the lease.

Other reasons for sub-letting include:

• Using the sub-lease as an income stream.
• If you think you may wish to use the property later.
• If you want to dispose of only part of the property and keep the rest for your own use (most landlords are extremely unlikely to allow you to assign part only of your lease).

How much does it cost to assign a commercial lease?

Assigning a commercial lease typically involves various costs that both the assigning tenant and assignee need to consider. Some of the common costs associated with assigning a commercial lease in the UK may include:

• Legal Fees: Engaging a solicitor to assist with the assignment process, review the lease agreement, draft the assignment documentation, and negotiate terms with the landlord can incur legal fees. Usually, the assignor and assignee bear their own legal costs for the transaction. The total fees can vary on a lease by lease basis, but often cost somewhere between £800 to £1,500 plus VAT for a complete service depending on the complexity.
• Landlord's Costs : The landlord usually charges its legal fees for processing the assignment, as well as administrative costs and any costs associated with reviewing the assignee's financial standing to provide its consent to the assignment. Depending on market conditions and bargaining strength, the incoming tenant/assignee usually pays the landlord’s legal fees but parties can choose to split the costs between them.
• Fulfilling lease obligations : Where such conditions are attached to the landlord providing his consent, this could mean anything from ensuring rent payments are up to date, to carrying out any repairs or maintenance deemed necessary, particularly if dilapidations are present.
• Surveyor's Fees : If a surveyor is engaged to assess the property's condition or value, the surveyor's fees may apply.
• Premium : depending on market conditions, if the rent payable under the lease is higher than the average current rate - the incoming tenant or assignee may negotiate that the current tenant pays them a premium to account for the difference.
• EPC : If this certificate has expired, the assignor will likely need to cover the costs of obtaining a new one to market the property.
• Costs for the assignor: If the assignment involves the payment of a premium or consideration, SDLT may be payable by the new incoming tenant based on the value of the premium or consideration. Other costs the assignee may need to factor into account include any security deposits required by the landlord, advance rent or Land Registry fees.

It is essential for both parties involved in the lease assignment to budget for these costs and factor them into their financial planning.

How long does the lease assignment process typically take?

The timeline for assigning a commercial lease can range from weeks to several months, depending on the complexity of the lease, the speed at which landlord consent is obtained, as well as the overall responsiveness of third-party solicitors in agreeing the paperwork. If the landlord is slow to provide consent to assign, or identifies repair works or other obligations to be fulfilled under the lease before agreeing to the assignment, the process will naturally take longer. To avoid potential delays, current tenants should seek to make enquiries with their landlord well in advance of their desired assignment date, and ensure they are up to date with their lease terms.

The process of assigning a lease can be complex and comes with legal implications for all parties involved. Whether you are a landlord, current tenant or incoming tenant, it is crucial to consult legal experts to help you navigate the process effectively and protect your interests in the commercial property transaction. Planning ahead and allowing plenty of time to obtain the landlord’s consent, negotiate the paperwork and ensuring lease terms are complied with can lead to a smoother successful transaction. If you have any questions about assigning a commercial lease, our friendly team of commercial property solicitors at Harper James are here to help.

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Parmjit Gill

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Leasehold charges – What to know

Are you buying or do you own a leasehold flat or house? Then you need to be aware of the different on-going leasehold charges. Our handy guide sets out the questions you need to ask if you are buying and what to be aware of as an owner.

Buying a home is probably the biggest financial transaction of your life. There is pulling together the cash for a deposit, mortgage set up fees, conveyancing fees, stamp duty, moving costs. The list goes on. But it doesn’t stop there. When you move in there are ongoing costs with leasehold properties. Here we outline what leasehold charges you can expect to pay before you buy.  For more advice on what to consider when buying a leasehold property , see our guide.

What are the lease administration fees and who do I pay? 

When you buy, own or sell a leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations may be to make certain payments to the person or the organisation responsible for managing your building. That person – the lease administrator – might be your landlord, a management company or a managing agent instructed by the landlord.

What are the main leasehold charges

There are three types of leasehold charges: ground rent, service charges and administration charges .  You should understand what you are likely to have to pay for each of these before you exchange contracts on the property you are looking to buy. If you are buying on a new build estate you may also need to pay estate management charges to pay for the upkeep of shared spaces.

You may need to make regular payments of ground rent and service charges . Service charges are your contribution to the upkeep of any shared parts of the building or grounds.  In some cases, you may need to make one-off payments relating to your ownership and use of your property. For instance if you want to remortgage or make any alterations to the property. These are called administration charges.

Your solicitor or conveyancer will tell you about those payments. As they will impact your day to day outgoings, do check them if you are not 100% sure.

It is important when buying a leasehold property to ensure that all payments of ground rent, service and administration charges will be up-to-date when you complete on your purchase .

Leasehold reform: What’s happening?

In November 2023 the government introduced the Leasehold and Freehold Reform Bill that includes a range of proposals including requiring transparency over leaseholders’ service charges. It also announced it was consulting on the capping of ground rent. For more on this and other proposed changes read our guide on Leasehold reform .

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Ground rent

Although the lease may initially oblige you to pay a fixed amount of ground rent, it may also contain a clause which allows the landlord to increase the rent in years to come.  Ask your conveyancer to explain if there are any rent review clauses in your lease. And, check what this would mean for you.  If the calculations are complex, seek advice so that you are sure of how they work.

If you bought a new leasehold property after June 2022, your ground rent will be zero because of changes to the law . This applies to retirement properties from April 2023. For shared ownership properties , landlords will only be able to levy ground rent on the share that the tenant does not own.

Service charges

Leasehold service charges normally vary according to the amount that is spent by the Lease Administrator each year on the upkeep of the building as a whole.  This includes, for example, cleaning common areas or making repairs (such as painting the building or replacing the roof). See our guide on leasehold service charges for more advice on what to expect and what to do if problems arise.

The charges may include buildings insurance , though, sometimes this is quoted separately.

Generally, the lease will require you to pay a fixed percentage or ‘reasonable proportion’ of the cost.

You should ask your conveyancing solicitor what items you will need to pay for. Check whether the lease administrator has any plans for expensive works for which you will be responsible. And, when payment for these will be due.

Compare conveyancing quotes from regulated and reviewed conveyancing solicitors that cover your area.

Administration charges

The Lease Administrator is likely to charge administration fees if you ask for a service connected with your buying, selling or use of the property.  The following are examples:

Administration charges when you sell

• Leasehold Property Enquiries.  You will probably need to pay the lease administrator to provide the information required by your buyer and their lender when assessing the suitability of the title of the property.  Most conveyancing solicitors recommend the use of the LPE1 and LPE2 forms because it is endorsed by both the legal and leasehold industry.
• Licence to Assign.  It is possible that your lease requires you to obtain a license from the Leases Administrator to sell the property .  This will often involve them ‘vetting’ the new owner to make sure they meet the Lease Administrator’s criteria. They will charge a fee for this.
• Exit or transfer fee. Some leases, usually in retirement properties , may also include an ‘exit’ or ‘transfer’ fee usually expressed as a percentage of the value. Find out more in our guide The hidden costs of retirement properties .

To ensure you are aware of any such administration costs, instruct your conveyancing solicitor to review your lease before you market the property.  If you tell them about any changes you have made, they can also highlight if you need to obtain the Landlord’s consent to the changes before you sell the property.  A buyer will want to see that those consents are in place. It could add delay or cost to the sale if they are not.

When buying a leasehold property , there will be additional conveyancing costs because of the extra legal work involved. For instance your conveyancing solicitor will need to check the lease and liaise with the lease administrator to get further information about the service charge or management details.  You can find out more about the costs of leasehold conveyancing that can be anything from £100 to £1,000.

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

Administration charges when you buy

• Deed of Covenant. Some Leases require that you enter into a Deed to confirm that you will be bound by the terms of the Lease.
• Notice of Assignment and Charge. The lease administrator will require that notice is served on them of the change in ownership and mortgage lender. This is so that they can make sure that they have your contact details and can provide you with information about their plans and charges for the upkeep of the property during your ownership.
• Certificate of Compliance. This is a document that the lease administrator provides to confirm to the Land Registry that the requirements in the lease for the change in ownership have been complied with.
• Stock or Membership Transfer. If you will be required to become a member of the management company, then some administrators charge a fee for transferring the share or membership in the Management Company into your name.

Administration charges during ownership

• Consents. Some leases have clauses which restrict your use of the property. They may require you to obtain the consent of the Lease Administrator to certain changes at the property. Examples include running a business from the property, installing laminate flooring, a new boiler or bathroom, extending or altering the property, letting it out and even keeping a pet. The tribunal has ruled that a reasonable charge is between £45 and £165.
• Notice of Change. If you remortgage the property during your ownership, then the Lease Administrator may be entitled to receive notice of the change of lender.
• Deed of Variation. If there is an error on the lease or you want to change the terms of the Lease, a deed varying the lease terms is likely to be required.

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Disputing unreasonable Fees

Many Lease Administrators work fairly and professionally, and charge very reasonable fees for the work that they do. But some either ignore the law or exploit a loophole in the law to charge unreasonable fees.  Here’s how to dispute unreasonable fees:

If the Lease Administrator IS a member of RICS or ARMA

If the lease administrator IS a member of the Royal Institution of Chartered Surveyors (RICS) or Association of Residential Managing Agents (ARMA), they will be bound by a code of practice.

You can complain to RICS or ARMA, as well as the Lease Administrator, if a fee is unreasonable.

If the Lease Administrator Is NOT a member of RICS or ARMA or if you are not happy with their response, you do still have options

The Commonhold and Leasehold Reform Act 2002 states that lease administrators cannot charge unreasonable fees for administrative services in connection with two services:

a) the grant of consent and b) the provision of information.

That means that for providing Leasehold property enquiries and for Consents they cannot charge an excessive fee for the work involved. Any other activity required in connection with the provision of information or consents should also be reasonable.

What to do if you are charged an unreasonable administration fee

If the lease administrator charges you an unreasonable administration charge, you can take action against them.

This might simply be a case of your conveyancer raising the issue with them and pointing out the case law.  But, sometimes that causes delays and customers choose to pay the fee to obtain the information and then complain afterwards.

If the lease administrator charges an unreasonable administration charge, you can apply to the First-tier Tribunal (Property Chamber). That might sound daunting, but it is in fact a straightforward process that can be done at any time before, during or after payment has been made.

• All you need do is to download and complete the form ‘Leasehold 1’ from the gov.uk website and send it with the required fee to the Tribunal.
• The initial application fee is £100 then an extra £200 if the case goes to a hearing. You can request that the Tribunal require that the lease administrator refunds the fee to you if it is fair to do so after your application has been decided.
• You should take legal advice on what the potential costs might be to you and other leaseholders if you are unsuccessful in your complaint. Some leases allow for the landlord to claim back legal fees from the leaseholders.

What is a reasonable leasehold administration fee?

What is a reasonable fee will depend upon the amount of work required in providing the service and the complexity of the Lease arrangements. But there are cases heard by the Tribunal where they have reviewed the evidence and decided what a reasonable fee should be on the particular facts of that case.

• Deed of Covenant in connection with consent to let: £80.
• Grant of consent: £40-£165.

Further advice on your rights and leases is available via the LEASE website.

Leaseholder guide to lease administration fees

To read the pdf version of our guide to leaseholder administration fees, click the button below.

Related Reads

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• Leasehold reform 2024: What you need to know
• Buying or owning a leasehold house
• Step by step guide to buying a freehold
• Homes Held Hostage - The HomeOwners Alliance report into the UK leasehold system, 2017
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• Leasehold property: service charge problems
• Lease extension process: A step-by-step guide
• When to extend your lease

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Charges when Selling or Buying Leasehold Property

When you buy, own or sell a Leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations will be to make certain payments to the person or the organisation responsible for administering and managing your building. That person might be a landlord, a management company, or a managing agent instructed by the landlord or management company (referred to below as "the landlord"). The typed of payments or charges can be divided into three groups. They are:

Ground Rent

Your lease may provide for you to make regular payments of ground rent as well as service charges. Although the lease may initially oblige you to pay a fixed amount of ground rent, it may also contain a clause which allows the landlord to increase the rent in years to come. When buying a leasehold property you should always ask your conveyancer to explain if there are any rent review clauses in your lease and explain what this would mean to you in financial terms.

Service Charge

Service charges normally vary according to the amount that is spent by the landlord each year on the upkeep of the building as a whole, including for example, cleaning the communal areas, gardening, maintaining and renewing the structure of the building (including the roof), building insurance. Usually, the lease will oblige you to pay a fixed percentage or a "reasonable proportion" of that amount. You should ask your conveyancer how the service charge is calculated, what it covers and whether the landlord has any plans for expensive remedial works to be carried out to the building for which you will be responsible.

Administration Charges

The landlord is likely to make an administration charge if you ask for a service connected with the buying or selling of a leasehold property. The following are examples of these charges you may have to pay,

When you are selling

1. Sellers leasehold pack: When you are selling a leasehold property it will be your responsibility to pay the landlord's charge to provide a Sellers leasehold pack (usually in the form of a Form LPE1) to provide the leasehold information required by your buyer and their lender.

2. Licence to Assign: It is possible that your lease requires you to obtain a licence from the landlord to sell the property. This involves the landlord approving the buyer as a new owner of the property. You may have to pay both the landlord's and landlord's solicitors charges for consenting to the sale and providing the Licence.

3. Exit or Transfer Fee: A retirement flat lease may include an "exit" or "transfer fee" payable by you from the sale proceeds and expressed as a percentage of the property value.

When you are buying

1. Deed of Covenant: Some leases require a buyer to enter into a Deed with the landlord to confirm that you will be bound by the terms of the lease. The buyer has to pay this charge.

2. Notice of Assignment of Transfer and Charge: The landlord will require that a notice is sent to them notifying of the change of ownership and any mortgage lender. This is to ensure that the landlord has your contact details (these may be different from the address of the property you have purchased) for the purpose of sending you ground rent and service charge invoices, and details of works to be carried out to the building.

3. Certificate of Compliance: The landlord may be required to provide this to confirm to the Land Registry that the change of ownership requirements in the lease have been complied with.

4. Share or Membership Transfer Charge: If you are required to become a member of the Management Company then the landlord may make a charge to transfer the share or membership certificate into your name.

To ensure that you are aware of the above charges and procedures, when you are selling or buying leasehold property, you should ask your conveyancer to review the lease and property title at an early stage.

Hughes Paddison has an experienced residential property team who are able to advise on all aspects of leasehold conveyancing whether you are selling or buying. Please contact our residential property team, we will spend time discussing any queries you have concerning the leasehold property you are buying or selling, and provide you with a conveyancing quote.

The information contained on this page has been prepared for the purpose of this blog/article only. The content should not be regarded at any time as a substitute for taking legal advice.

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Leases: when to register (PG25)

Advice for conveyancers which deals with the compulsory and voluntary registration aspects of leasehold estates in land (practice guide 25).

Applies to England and Wales

Practice guide 25: leases - when to register.

This guide deals with the compulsory and voluntary registration aspects of leasehold estates in land, including those that cannot be registered.

It also deals with how to apply to register and note leases (including when we will automatically note a lease against a registered reversionary title) and with deeds of variation.

It does not deal with leases revealed as disclosable interests; see practice guide 15: overriding interests and their disclosure .

The guide is aimed at conveyancers and you should interpret references to ‘you’ accordingly.

We only provide factual information and impartial advice about our procedures. Read more about the advice we give .

You can join our free webinars for advice on a range of land registration topics and how to prepare quality applications.

Updates to this page

The guide has been amended to reflect how applications should be made using our digital systems.

Sections 1 and 2.3 have been amended to update references to section 83 of the Charities Act 1993 to section 334 of the Charities Act 2011.

Section 4.1 has been amended to improve clarity on leases granted for a term of seven years or less or where the unexpired term is for seven years or less.

Section 6.2 has been amended to give guidance for future applications where a new lease out of a registered title is lodged for registration by a conveyancer who only acts for the tenant’s lender. In such cases, we will in future need written confirmation from the tenant’s conveyancer of their client’s address for service and identity.

Following customer feedback we have amended section 6.2 to explain further our policy on dealing with applications where the landlord's title is leasehold and there is a note saying the lease restricts alienation. If the new lease is not caught (for example if the restriction on alienation exempts shared ownership leases and that is what the new lease is), a conveyancer will need to certify that the new lease falls in a permitted category and is not caught by the terms of the alienation clause in the superior lease, otherwise we will add the protective entry mentioned to the register.

Section 6.2 has been amended to include a link to other relevant guidance.

Following customer comment, we have amended section 6.2 to clarify which consents are required.

Minor changes have been made to section 6 of this guide to mention that an application for first registration can be made on the basis of certified copy deeds and documents only; and to section 7.2 following the change of name of practice guide 12. Sections 6.1, 6.2 and 6.3.1 have been updated to reflect the introduction of Land Transaction Tax for transactions affecting land in Wales completed on or after 1 April 2018.

Section 4.3 has been amended to reflect our current practice.

Link to the advice we offer added.

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