What can You do if your Commercial Tenant wants to Leave?

Your tenant approaches you with the news that they have found a new tenant for your property and that they wish to vacate – quickly. Their business is not going as well as anticipated and they express concerns about being able to continue to pay rent. The prospective tenant is keen to move in and your tenant obviously keen to move on, with one eye on the deposit they provided in order to obtain the lease in the first place. Having found you a substitute tenant, your tenant is hoping you look favourably on their request, but as a landlord, you are keen to preserve the return on your investment. You wonder how best to approach the situation and whether you are under an obligation to agree to the assignment of the lease at all.

In this respect, the drafting of your commercial premises lease is of particular importance: the terms of the lease will dictate the approach you shall need to take. For instance, if the lease has an absolute prohibition on assignment, whether you allow your tenant to assign is ultimately at your discretion. However, chances are your tenant is permitted to assign but will be required to seek your consent, which you cannot unreasonably withhold. Even if your lease appears not to be subject to a requirement to act reasonably, it will nonetheless be implied by statute.  

​It is therefore important that on receipt of the application from your tenant you seek legal advice – and soon. There may be conditions stipulated in the lease which the tenant needs to fulfil and if left unfulfilled, you will not be unreasonably withholding consent. If those conditions have been met, you will need to consider their application a little more carefully: the time you take to respond is critical, whether to ask for further information or in giving your answer – the latter of which must be in writing. You nearly always need to consider the financial position of the prospective new tenant, which may not always be determined by their previous levels of profit, but you may also need to consider outstanding breaches of lease covenants and whether the prospective new tenant is in a position to remedy them.

Applications made to the landlord for consent to assign the lease will nearly always be made at the existing tenant’s cost, so there is very little reason not to instruct a firm of solicitors to assist you with the process. 

MORE INFORMATION 

For further information and assistance on commercial property matters, please contact our Commercial Property Department for more information – call us or email by using the form to the right. This article was written by Ben Hersom, Solicitor at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of October 2018.