A licence to assign is one of the most important documents in a commercial lease transaction where an existing tenant wants to transfer their lease to a new tenant. For business owners, landlords, buyers and sellers, it can affect timing, negotiation strength, legal risk and whether a transaction completes smoothly.
In a commercial property context, assignment usually arises when a tenant sells a business, relocates, restructures, or no longer needs the premises before the lease has ended. Most commercial leases in England and Wales restrict assignment, meaning the tenant cannot simply hand the lease to someone else without first obtaining the landlord’s formal consent.
This guide explains what a licence to assign is, when it is required, how the process works, what a landlord can reasonably ask for, what tenants should prepare, and why early legal advice can reduce delays and avoid expensive disputes.
Key point: a licence to assign is not just an administrative formality. It is a legally significant document that records the landlord’s consent to the transfer of a commercial lease and often sets out conditions that must be satisfied before completion.
Need advice on a Licence to Assign? If you are assigning a commercial lease, taking over leasehold premises or responding to a landlord’s consent requirements, early legal advice can help prevent delays and avoid unnecessary risk. Contact our commercial lease solicitors on 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form.
What is a Licence to Assign?
A licence to assign is a formal written document by which a landlord gives consent for an existing tenant to assign, or transfer, a commercial lease to another party. The existing tenant is usually called the assignor. The incoming tenant is usually called the assignee.
Once the assignment completes, the assignee takes over the tenant’s interest in the lease. This means the assignee will usually become responsible for the ongoing tenant obligations, including payment of rent, compliance with repairing obligations, service charge responsibilities, insurance contributions and any use restrictions contained in the lease.
The licence to assign commercial lease document will normally identify the landlord, outgoing tenant and incoming tenant, refer to the lease being assigned, set out the landlord’s consent, record any conditions attached to that consent, and confirm any related documents required on completion.
When is a Licence to Assign needed?
A licence to assign is usually needed where a commercial lease says that the tenant cannot assign the lease without the landlord’s consent. Most modern commercial leases contain this type of restriction. It is often found in the alienation provisions of the lease. Alienation is the legal term used for dealings with a lease, including assignment, underletting, charging or sharing occupation.
Common situations where a licence to assign may be required include:
- The sale of a business where the buyer needs to take over the premises;
- A tenant relocating before the contractual lease term has expired;
- A group company restructure involving transfer of leasehold property;
- A tenant wishing to exit premises where there is no break clause;
- A franchise, retail, hospitality or office transaction where occupation of the premises is essential to the business sale;
- A landlord requiring formal consent before allowing an incoming tenant into occupation.
If a tenant assigns without consent where consent is required, this may amount to a breach of lease. The consequences can be serious and may include landlord enforcement action, a claim for damages, refusal to recognise the assignment, or in some cases steps relating to forfeiture. For that reason, the lease should be reviewed before any agreement is reached with a proposed assignee.
The Legal Framework in England and Wales
The law relating to a licence to assign in England and Wales is shaped by the lease itself, the Landlord and Tenant Act 1927, the Landlord and Tenant Act 1988 and the Landlord and Tenant (Covenants) Act 1995.
The lease is the starting point
The first question is always what the lease says. Some leases prohibit assignment entirely. Some permit assignment with consent. Some permit assignment only if specific conditions are satisfied. Others impose different rules depending on whether the assignment is of the whole premises, part of the premises, or to a group company.
Many commercial leases include a qualified covenant against assignment. In simple terms, this means the tenant may assign only with the landlord’s consent. Where this type of clause applies, the law will often imply that the landlord’s consent is not to be unreasonably withheld.
Section 19 of the Landlord and Tenant Act 1927
Section 19 of the Landlord and Tenant Act 1927 is central to the law on consent to assign. Where a lease contains a covenant against assignment without consent, the statute can operate so that consent is not to be unreasonably withheld. This prevents a landlord from having complete freedom to refuse consent for reasons unconnected with the landlord and tenant relationship.
For many modern commercial leases, section 19(1A), introduced by the Landlord and Tenant (Covenants) Act 1995, is also important. It allows the parties to agree circumstances in which consent may be withheld, or conditions subject to which consent may be given, particularly in relation to new tenancies. This is why the drafting of the alienation clause matters. The lease may already specify circumstances where the landlord can refuse consent or require conditions such as an authorised guarantee agreement.
The Landlord and Tenant Act 1988
The Landlord and Tenant Act 1988 imposes duties on landlords where the tenant makes a written application for consent in circumstances where consent is not to be unreasonably withheld. Broadly, the landlord must deal with the application within a reasonable time, give consent unless it is reasonable not to do so, and provide written reasons if consent is refused or conditions are imposed.
The Act is important because it moves the issue beyond informal correspondence. If a landlord fails to respond properly, delays without justification, refuses consent for inadequate reasons, or imposes unreasonable conditions, the tenant may have legal remedies.
Can a landlord refuse a Licence to Assign?
A landlord can refuse consent where it is reasonable to do so. What is reasonable depends on the facts, the lease wording and the information available to the landlord at the time. The landlord is not required to prove that the proposed assignment would definitely fail, but the refusal must be connected to legitimate landlord and tenant considerations.
Reasonable grounds for refusal may include genuine concerns about the proposed assignee’s financial standing, evidence that the assignee is unlikely to comply with lease obligations, an intended use that would breach the lease, or failure by the tenant to provide information reasonably required to assess the application.
However, a landlord should not refuse consent for reasons unrelated to the lease relationship. For example, a refusal designed to obtain an unrelated commercial advantage, renegotiate the lease, or force the tenant to surrender the lease may be open to challenge.
Key case law on reasonable consent
The courts have considered the meaning of reasonable refusal in several important cases. In International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513, the Court of Appeal confirmed that a landlord should not refuse consent on grounds that have nothing to do with the landlord and tenant relationship in relation to the property.
In Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59, the House of Lords considered whether a landlord could reasonably refuse consent where the proposed assignee intended to use the premises in a way that the landlord believed would breach the lease. The decision supports the practical proposition that a landlord will often be acting reasonably if it refuses consent because the proposed assignment may lead to a breach of covenant.
These authorities show why a licence to assign is fact-sensitive. The correct answer is rarely found by applying a single rule in isolation. The lease wording, proposed assignee, intended use, financial information, timing and correspondence all matter.
How the Licence to Assign process works
Although every transaction is different, the licence to assign process usually follows a predictable sequence. Starting early is important because landlord consent can affect the timetable for a business sale, property transaction or relocation.
1. Review the commercial lease
The tenant’s solicitor should review the lease to identify whether assignment is allowed, whether landlord consent is required, whether any preconditions apply, and whether the landlord can require an authorised guarantee agreement, rent deposit, guarantor or other security.
2. Prepare the application for consent
The tenant should make a clear written application to the landlord or managing agent. The application should provide enough information for the landlord to make an informed decision. A vague request can cause delay and may give the landlord a legitimate reason to ask further questions.
The application may include the proposed assignee’s company details, accounts, trading history, references, business plan, proposed use of the premises, evidence of funding, details of any guarantor, and confirmation that the proposed use complies with the lease and planning position.
3. Landlord reviews the proposed assignee
The landlord will usually want to assess whether the incoming tenant is financially reliable and likely to comply with the lease. This is commercially understandable because the landlord is being asked to accept a different tenant for the remainder of the term.
Where the assignee is a new company, has limited trading history or has weaker financial standing than the outgoing tenant, the landlord may request additional security. Whether that request is reasonable will depend on the lease, the transaction and the evidence available.
4. Negotiation of conditions
The landlord may give consent subject to conditions. Common conditions include payment of the landlord’s reasonable legal and surveyor’s costs, completion of an authorised guarantee agreement, provision of a rent deposit, entry into a deed of covenant, or delivery of satisfactory references.
Conditions should be carefully reviewed. A condition may be commercially common but still inappropriate if it is not permitted by the lease, is disproportionate, or is unsupported by the circumstances.
5. Completion of the licence and assignment
Once the licence to assign has been agreed, the parties usually complete the licence and the deed of assignment at the same time. The assignee then becomes the tenant under the lease. Depending on the lease, notices of assignment may also need to be served and registration requirements may apply.
What documents are usually needed for a Licence to Assign Commercial Lease?
The exact documents depend on the lease and transaction, but a licence to assign commercial lease matter may involve:
- The existing commercial lease and any supplemental documents;
- The landlord’s formal licence to assign;
- A deed of assignment transferring the lease to the assignee;
- An authorised guarantee agreement, if required and permitted;
- A rent deposit deed, if the landlord reasonably requires a deposit;
- A deed of covenant by the assignee;
- A guarantor covenant or guarantee document;
- Board minutes, company approvals and identity documents;
- Land Registry documents where the lease is registered;
- Notices of assignment and payment of any notice fees required by the lease.
Commercial property solicitors can help ensure these documents work together properly. A poorly drafted licence or assignment can leave uncertainty about responsibility for arrears, service charge, repairs, insurance, reinstatement and ongoing lease liabilities.
Unsure what documents you need? Our commercial property solicitors can review your lease, identify the consent requirements and help prepare the documentation needed for a licence to assign commercial lease transaction. Call 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form.
Authorised Guarantee Agreements and ongoing liability
An authorised guarantee agreement, often called an AGA, is a document by which the outgoing tenant guarantees that the incoming tenant will comply with the lease obligations. If the assignee later defaults, the landlord may be able to pursue the outgoing tenant under the AGA.
AGAs are particularly relevant to leases granted on or after 1 January 1996, following the Landlord and Tenant (Covenants) Act 1995. The Act changed the rules on continuing tenant liability and introduced a framework in which an outgoing tenant may be released from future lease obligations on assignment, but may still be required to guarantee the immediate assignee if the lease permits this.
From a tenant’s perspective, an AGA should never be treated as a routine signature. It may create a real financial exposure after the tenant has left the premises. Before agreeing to an AGA, the tenant should understand the assignee’s financial strength, the duration of the guarantee, the rent and service charge exposure, and what happens if the assignee becomes insolvent.
How long does a Licence to Assign take?
There is no fixed statutory number of days that applies to every licence to assign. The landlord must usually respond within a reasonable time once a proper written application has been made. What is reasonable depends on the facts, including the complexity of the lease, the quality of the information provided, the need for superior landlord consent, and whether further enquiries are justified.
In straightforward matters, the process may take a few weeks. More complex transactions can take longer, particularly where there are missing documents, concerns about the assignee’s covenant strength, negotiations over security, arrears, dilapidations, superior landlord consent or lender requirements.
Tenants can reduce delay by preparing a complete application at the start. Assignees can also help by providing financial information promptly and confirming how they intend to use the premises.
Who pays the costs of a Licence to Assign?
Commercial leases commonly require the tenant to pay the landlord’s reasonable legal and professional costs in connection with an application for consent to assign. The tenant will also have their own solicitor’s costs. In a business sale, the parties may agree commercially whether the outgoing tenant, incoming tenant or both will bear certain costs, but this arrangement does not necessarily alter the tenant’s obligations to the landlord under the lease.
The word reasonable is important. A landlord is generally entitled to recover proper costs incurred in considering and documenting the application, but excessive or unrelated costs may be challenged depending on the circumstances and lease wording.
Common problems with a Licence to Assign
Many licence to assign issues arise because the parties underestimate how much detail is involved. Common problems include:
- Making the application too late in the transaction timetable;
- Allowing the assignee into occupation before consent is completed;
- Failing to check whether the proposed use is permitted by the lease;
- Assuming landlord consent is automatic;
- Providing incomplete financial information for the assignee;
- Overlooking superior landlord or lender consent;
- Ignoring arrears, service charge disputes or breaches of covenant;
- Signing an authorised guarantee agreement without understanding the risk;
- Failing to serve notices after completion;
- Using documents that do not align with the lease terms.
These issues can delay completion, weaken negotiating positions and increase costs. A structured approach at the outset is usually more efficient than trying to resolve problems shortly before exchange or completion.
Practical Guidance for Tenants
If you are the outgoing tenant, your objective is usually to complete the assignment without breaching the lease or accepting avoidable ongoing liabilities. Before approaching the landlord, check the lease, identify all assignment conditions, gather information about the proposed assignee and decide whether any arrears, rent review issues, service charge disputes or repair problems need to be addressed.
You should also consider the wider commercial deal. If the assignment is part of a business sale, the buyer’s ability to take the lease may be essential. Completion of the business sale should therefore be conditional on the landlord’s licence to assign being obtained. Otherwise, you may be contractually committed to a sale that cannot be completed in practical terms.
Practical Guidance for Incoming Tenants
If you are the assignee, the lease you take over may contain significant obligations. Before agreeing to take an assignment, review the remaining term, rent, rent review provisions, service charge exposure, repairing obligations, permitted use, break rights, security of tenure position, insurance provisions, reinstatement obligations and any existing breaches.
An assignment is not the same as negotiating a brand-new lease. You are usually stepping into an existing document. That means you inherit the benefit and burden of the lease as it stands, subject to the terms of the assignment and any related documents. Legal due diligence is therefore important, especially for retail, hospitality, office, industrial and mixed-use premises.
Practical Guidance for Landlords
If you are a landlord, a licence to assign is an opportunity to assess whether the proposed assignee is likely to comply with the lease. The decision should be made carefully and documented clearly. If consent is refused, the reasons should be legally supportable and connected to the landlord and tenant relationship.
Landlords should avoid delay, unclear conditions or reasons that appear unrelated to the lease. Where further information is needed, the request should be specific and proportionate. If concerns exist about covenant strength, use, arrears or breaches, those concerns should be evidenced and communicated appropriately.
What happens if consent is unreasonably withheld or delayed?
If a landlord unreasonably withholds or delays consent, the tenant may have legal remedies. Depending on the circumstances, the tenant may seek a declaration from the court, claim damages, or use the landlord’s failure as part of wider negotiations. However, assigning without consent can be risky unless the tenant is confident that consent has been unreasonably withheld and has taken legal advice.
Disputes about reasonableness are fact-sensitive. The safer course is usually to build a clear paper trail: make a proper written application, provide relevant documents, chase politely and record responses. This helps demonstrate whether the landlord had enough information, whether delay was justified and whether any refusal was reasonable.
Why choose Elite Law Solicitors for a Licence to Assign?
At Elite Law Solicitors, we advise on commercial property matters for businesses, landlords, tenants and individuals across England and Wales. A licence to assign requires more than simply filling in a template. It requires a careful review of the lease, an understanding of the commercial transaction, and practical management of the consent process so that completion is not delayed unnecessarily.
Our commercial property solicitors can assist with reviewing the lease, preparing or reviewing the application for consent, negotiating the licence to assign, advising on authorised guarantee agreements, dealing with rent deposit arrangements, preparing the deed of assignment, liaising with the landlord’s solicitors and ensuring notices and post-completion steps are handled properly.
We have more than 1,600 reviews on ReviewSolicitors and are rated 4.9 out of 5, reflecting a strong record of client feedback across the firm. For clients considering whether to instruct a solicitor, independent reviews can provide reassurance about service standards, communication and client experience.
To discuss a licence to assign commercial lease matter, please contact us today by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or completing our Free Online Enquiry Form.
Frequently Asked Questions About a Licence to Assign
Do I need a licence to assign if I am selling my business?
You may need a licence to assign if the business operates from leasehold commercial premises and the buyer needs to take over the lease. The business sale agreement should usually deal with this as a condition of completion. If the lease cannot be assigned, the buyer may not be able to occupy the premises, which can put the wider transaction at risk.
Can a licence to assign commercial lease be refused because the assignee is a new company?
A landlord may be concerned if the assignee is a newly incorporated company with no trading history, but that does not automatically mean refusal will be reasonable. The landlord may ask for additional information or security, such as a rent deposit or guarantor, depending on the lease and circumstances. The key issue is whether the landlord’s concerns are legitimate and proportionate.
Can the landlord charge legal fees for a licence to assign?
Most commercial leases require the tenant to pay the landlord’s reasonable legal and professional costs for dealing with the licence to assign. The landlord’s costs should relate to the consent application and documentation. If the amount appears excessive, unrelated or unsupported, it may be possible to question it.
What information should I provide with a licence to assign application?
A strong application will usually include details of the proposed assignee, financial information, references, proposed use, evidence of business experience, confirmation of funding and any guarantor or rent deposit proposal. Providing this information early can reduce delay and make it harder for the landlord to argue that further time is needed.
Can an incoming tenant move in before the licence to assign is completed?
This is usually risky. If the lease requires consent before assignment or occupation, allowing the incoming tenant into the premises early may breach the lease. It may also create uncertainty about insurance, liability, rent, repairs and responsibility for compliance. The safer approach is to complete the licence to assign and deed of assignment before occupation changes.
Is a licence to assign the same as a deed of assignment?
No. The licence to assign is the landlord’s consent to the transfer. The deed of assignment is the document that actually transfers the lease from the outgoing tenant to the incoming tenant. In many transactions, both documents are completed at the same time, but they serve different legal purposes.
What happens after a licence to assign is completed?
After completion, the assignee normally becomes responsible for the tenant obligations under the lease. Notices of assignment may need to be served on the landlord or managing agent. If the lease is registered, Land Registry requirements may also need to be considered. The parties should ensure all post-completion steps required by the lease are completed promptly.
Speak to Commercial Property Solicitors About a Licence to Assign
A licence to assign can be central to the success of a commercial property transaction, business sale or lease exit strategy. The earlier the lease is reviewed and the consent process is managed, the easier it is to identify risks, avoid delay and keep the transaction moving.
If you need advice about a licence to assign, assignment of a commercial lease, landlord consent, an authorised guarantee agreement or related commercial property documentation, our experienced commercial property solicitors can help can help. Simply call 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form
Legal note: This guide provides general information about licences to assign in England and Wales. It is not a substitute for legal advice on your specific lease or transaction.
