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.
This update was published in Legal Alert - February 2015
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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.
- 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.
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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