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Case law: Ineffective assignment means old tenant still liable for unpaid rent

Landlords and tenants should ensure that intended assignees of a lease are not allowed into premises until the necessary consents and other formalities have been completed, otherwise they risk unnecessary legal costs and, in the tenant's case, remaining liable for rent despite vacating the premises.

Legal Alert

This update was published in Legal Alert - February 2015

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A landlord let a car showroom to tenants on terms they could not assign the lease without the landlord's consent, not to be unreasonably withheld. A break clause also gave the tenants an option to end the lease on six months' notice provided they did so before May 2012. The option was personal to those tenants and would not automatically pass to the assignee.

The tenants asked the landlord to agree to an assignment and deposited a signed transfer deed with their solicitor. The landlord asked for personal guarantees from the directors of the proposed assignee. The proposed assignee asked for an option to end the lease on terms similar to those enjoyed by the existing tenants to be included in their lease.

Despite these issues still outstanding, the tenants moved out and the proposed assignee went into the premises - without a formal assignment being signed. The proposed assignee paid rent to the landlord (which was accepted), made improvements and asked the landlord to carry out certain repairs.

The proposed assignee then gave notice to the landlord that they wanted to leave the premises and paid part of the rent due. However, the landlord claimed the remainder from the original tenants on the basis there had been no effective assignment of the lease and they were still tenants and liable for the rent.

The Court of Appeal ruled that there had been no effective assignment, and the landlord's behaviour in accepting rent from the proposed assignee did not stop it from claiming that the original tenants were still tenants.

Operative date

  • Now

Recommendations

  • Landlords and tenants should ensure that intended assignees of a lease are not allowed into premises unless the necessary express consents, documentation and other formalities for assignment of the lease have been provided or completed, or they risk unnecessary legal costs and, in the tenant's case, remaining liable for rent despite vacating the premises.
Case law: Lankester & Son Ltd v (1) David Robert Rennie and (2) Anne Rennie [2014] EWCA Civ 1515

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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