Assignment, Subletting and AGAs

Alienation clauses control whether and how a tenant can pass on the lease, by assigning it or subletting. Landlords protect their position through consent and, on assignment, guarantees.

Assignment vs subletting

• Assignment: the tenant transfers the whole lease to a new tenant, who takes over the obligations.
• Subletting: the tenant grants a new, shorter lease of the premises (or part) to a subtenant, while staying liable under the head lease.

Consent

Most leases require the landlord's consent, and by law that consent must not be unreasonably withheld or delayed. You can usually impose reasonable conditions, such as references, a rent deposit, or a guarantee.

Authorised Guarantee Agreements

For leases granted from 1996, an outgoing tenant is generally released on assignment, but you can require them to guarantee the incoming tenant through an Authorised Guarantee Agreement (AGA) under the Landlord and Tenant (Covenants) Act 1995. This keeps the outgoing tenant on the hook for the next tenant's default, but only for that next tenant. Older leases granted before 1996 can carry original-tenant liability for the whole term under privity of contract.

Protecting yourself

Set out the alienation conditions clearly in the lease and heads of terms, take references and a suitable AGA or guarantee on assignment, and take advice before granting or refusing consent, since an unreasonable refusal can expose you to a claim.

Can a landlord refuse consent to an assignment?

Consent must not be unreasonably withheld or delayed, but you can usually impose reasonable conditions, such as references, a rent deposit or a guarantee.

What is an Authorised Guarantee Agreement?

On a lease granted from 1996, an AGA lets you require the outgoing tenant to guarantee the tenant they assign to, for that next tenant only.