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Assignment Of A Lease: Everything You Need To Know! 📃

May 08, 2024 | Laura Everitt

There are are plenty of reasons why you might want to exit your commercial lease early. Perhaps your current premises are no longer suitable for the needs of your growing business, or maybe your business is in financial difficulty and you need to find a lease with more favourable terms.

There are also plenty of options when it comes to deciding how to exit a lease before the specified end date. Some of the most common include: assignment of a lease, which involves passing the lease onto another business; terminating the lease, with the help of a break clause if your contract contains one; or subletting your premises and adopting the role of landlord yourself.

Unfortunately, exiting a lease early is not always a simple process. A lease is a legal contract, and if you break it your landlord could take you to court. Opting to pursue a process such as assigning the lease to a new tenant can make exiting a lease early possible, but there are many factors that should be considered before beginning this process.

If you are thinking of trying to leave your lease early, it is advisable to obtain independent legal advice from an appropriately experienced commercial property solicitor before taking any action.

If you require legal advice or assistance on getting out of a commercial lease please call us on 0800 086 2929 , email [email protected] or complete our Free Online Enquiry Form .

In addition to office meetings, we also offer remote meetings via telephone and video conferencing software so can assist you wherever you are based.

What is assignment of a lease?

The process of assignment of a lease is essentially selling the lease to a third party (the “assignee”).

If you are a commercial property tenant, your contract likely contains a clause that allows you to assign your lease to a new tenant. To do this, you will need to find a potential new tenant yourself. Your landlord will expect this new tenant to meet the same expectations they originally set for you, and you will probably need their consent before the assignment can be completed.

While your landlord cannot reasonably withhold their consent for the assignment, they are under no obligation to give their consent if the new tenant doesn’t meet the terms set out in your contract – so it’s wise to be picky yourself about the tenant you select.

There are likely to be restrictions around when and if you can assign your lease specified in your contract. Some common restrictions include not allowing lease assignments if the contract is for a short period, and not allowing the lease to be assigned if the lease is ending within a few years.

Once a lease as been assigned, the assignee will become the new tenant and will be responsible for ensuring compliance with all of the tenant’s obligations in the lease.

What checks will a landlord make before permitting assignment of a lease?

Financial status

Your landlord will want to see evidence – usually in the form of business bank account statements – that the new tenant is in a strong financial position

Statements from previous landlords that the tenant has leased property from will be required to show that the tenant is reliable and doesn’t have a history of missing payments or otherwise neglecting their responsibilities as a tenant

Proposed use of the premises

Your landlord will probably be looking for a new tenant to intend to use the premises in broadly the same way as you have done in the past as the lease will specify what use is allowed.

Likelihood of requesting alterations to the building

As above, your landlord will require advanced notice of any alterations the new tenant may wish to make to the premises, and in some cases written permission in the form of a Licence to Alter will be required. It is likely that they may withhold their consent for assigning the lease to any tenant intending to make large-scale changes depending upon the type of premises involved.

What liabilities will you have when assigning a lease?

It is important to recognise that the assignment of a lease to a new tenant does not automatically exempt you from all liabilities related to that tenancy going forwards. In fact, once the lease assignment is complete you can still be liable should the new tenant miss any payments or otherwise break the terms of their contract.

Exactly what you will be liable for depends on when your lease began. If your lease began before January 1996 you will remain liable for all payments by any subsequent tenants – even if the lease is assigned several more times after you. This is called “privity of contract”.

For leases that began after January 1996, you will be required to sign an Authorised Guarantee Agreement . This means you guarantee payments for the next tenant, but not any further tenants.

Landlords can only claim payments of rent within six months of the money being due, and only after full notice has already been served to the former tenant.

What does lease assignment cost?

On the other hand, if the rent under the new lease is below the market rate, the new tenant may instead want to pay you a premium. If this is the case, you’ll need to make a decision on whether to charge VAT – or “opt to tax” – something that’s worth getting professional advice on.

A final charge to be considered is the cost of this advice. It is highly recommended to involve your solicitor when opting to pursue a lease assignment so as not to inadvertently break the terms of your contract and leave yourself open to court action. You should therefore also factor solicitors’ fees into your calculations when considering the cost of exiting your lease.

How to get out of a commercial lease – what are the alternatives?

Assignment of a lease is not the only way to get out of a commercial lease and depending on your circumstances and the contract you have with your current landlord, it may not always be the best option.

Some alternative ways to get out of a commercial lease early include:

Using a break clause

Some lease contracts include a “break clause” which offers both parties the opportunity to end the lease early in certain circumstances. Read your contract carefully to check if it contains a clause like this, and if it does, what terms and conditions are involved. Any time limits specified in the lease for giving of notice must be strictly followed.

Negotiating a lease exit

If your contract does not include a break clause, your landlord may still be open to you exiting the lease early. You would need to negotiate the specific terms of your exit and your landlord may require a pay-out to offset the inconvenience of having to market the property again.

Compared to lease assignment, negotiating an exit from your lease should provide a clean break with no further liabilities, but we would recommend seeking legal advice to confirm that you were exiting the contract cleanly.

Subletting the premises

A final option to consider when looking at how to get out of your commercial lease early is subletting. If your contract allows it, you can take on the role of landlord by finding and leasing your property to a new tenant.

You can use the rent payments from your new tenant to cover your own obligations, but in return you’ll be expected to take a hands-on role managing the property and dealing with the sub-tenant directly.

Need assistance with assignment of lease?

Exiting a lease early can be a complex process, whether you choose to do so by arranging the assignment of your lease or by one of the other means mentioned above.

Lease assignment is an effective way for tenants to get out of a commercial lease early. However, this can be a slow process and you will incur costs.

Contacting a solicitor at an early juncture is advisable so that you are appropriately advised at the outset of any key considerations and potential pitfalls. For example, even though you are selling the lease, you could potentially remain liable afterwards; this will depend on the age of the lease and whether you have entered into an authorised agreement or not.

Laura Everitt is the Head of our Property Department and has many years of experience in dealing with lease assignment.  Laura assists and advises clients all over the country.  In addition to office meetings, Shakeel offers remote meetings via telephone or video conferencing software so can assist you wherever you are based.

Make a Free Enquiry

If you are considering how to get out of a commercial lease or have any queries relating to any of the issues discussed in this article, please get in touch with our of our experienced property lawyers by calling 0800 086 2929 , emailing [email protected] or completing our Free Online Enquiry Form .

The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified commercial property solicitors such as those within our firm .

Call us 24/7 on 0800 086 2929 , email  [email protected] , or complete our Free Online Enquiry Form to arrange a free, no-obligation discussion and let us explain your legal rights and options.

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Lease Assignment Agreement

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A lease assignment agreement is a legally binding contract outlining the terms and conditions of transferring a lease from one party to another in one place. This means the assignee becomes the new tenant and assumes all the rights, obligations, and liabilities under the original lease. Lease assignments are commonly used in real estate transactions when a tenant wants to transfer their lease to another party before the lease term expires. We will discuss the lease assignment agreements' purpose, key elements, and other relevant aspects.

Key Elements of a Lease Assignment Agreement

A lease assignment agreement includes several key elements outlining the terms and conditions of the lease transfer. These elements may vary depending on local laws and specific circumstances but generally include the following:

• Parties: The lease assignment agreement should clearly identify the parties involved, including the original tenant (assignor), the new tenant (assignee), and the landlord.
• Property: The agreement should specify the property subject to the lease assignment, including the address, unit number, and relevant details.
• Terms: The agreement should state the lease assignment's effective date, the original lease's remaining term, and any renewal or termination provisions.
• Rights and Obligations: The agreement should outline the rights and obligations of the assignor, assignee, and landlord, including rent payments, maintenance responsibilities, and any other lease terms that will carry over to the assignee.
• Consent: In most cases, the lease assignment agreement requires the landlord's written consent. The agreement should specify the conditions and process for obtaining landlord consent.
• Indemnification: The agreement may include provisions for indemnifying the landlord against any losses or damages resulting from the lease assignment.
• Governing Law : The agreement should specify the governing law and jurisdiction applicable to any disputes or legal matters related to the lease assignment.

Legal Implications of Lease Assignment Agreements

Lease assignments have legal implications for all parties involved. It is important to understand the potential legal risks and obligations associated with lease assignments. For tenants, it may be necessary to review the original lease agreement and seek legal advice to ensure compliance with the terms and conditions of the lease assignment. Landlords should carefully review and approve lease assignments to protect their rights and interests. In some jurisdictions, landlords may have the right to reject a proposed lease assignment for valid reasons.

Benjamin W.

Practical Tips for Managing Lease Assignment Agreements

Lease assignments can be complex, and it is important for tenants and landlords to approach them with caution. Here are some tips for navigating lease assignments:

For Tenants

• Review the Original Lease Agreement: Understand the terms and conditions of the original lease before entering into a lease assignment agreement.
• Seek Legal Advice: Consider consulting with a real estate attorney to ensure compliance with local laws and protect your rights and interests.
• Obtain Written Consent from the Landlord: Follow the process outlined in the lease assignment agreement to obtain written consent from the landlord before proceeding with the assignment.
• Communicate with all Parties Involved: Keep open communication with the assignee, assignor, and landlord throughout the process to avoid misunderstandings or disputes.
• Fulfill Obligations under the Original Lease: Even after the lease assignment, the assignor may still be responsible for fulfilling their obligations under the original lease until the effective date of the assignment.

For Landlords

• Review the Lease Assignment Carefully: Carefully review the proposed lease assignment agreement, including the terms and conditions, rights and obligations of the assignor and assignee, and any indemnification provisions.
• Require Written Consent: Insist on obtaining written consent from the assignor and assignee before allowing the lease assignment to proceed, as this protects your rights and interests as a landlord.
• Verify Financials and Credentials of Assignee: Conduct thorough due diligence on the proposed assignee's financials and credentials to ensure they can fulfill the lease obligations.
• Update Lease Documentation: Once the lease assignment is approved, update the lease documentation to reflect the new tenant (assignee) and provide copies to all parties involved.
• Communicate with all Parties Involved: Maintain open communication with the assignor, assignee, and any property management or legal professionals involved in the lease assignment process to ensure a smooth transition.

Potential Risks and Considerations

There are potential risks and considerations that tenants and landlords should be aware of when it comes to lease assignments. These may include:

• Non-Compliance with the Original Lease: If the assignee fails to comply with the terms and conditions of the original lease, the assignor may still be held liable for any breaches.
• Landlord's Right to Reject: In some jurisdictions, landlords may have the right to reject a proposed lease assignment for valid reasons, such as the assignee's inability to meet financial obligations or lack of appropriate credentials.
• Indemnification Provisions: The lease assignment agreement may include indemnification provisions that hold the assignor and assignee responsible for any losses or damages resulting from the lease assignment.
• Legal Disputes: Disputes may arise during the lease assignment process, such as disagreements over the terms and conditions, consent requirements, or other related matters.
• Local Laws and Regulations: Lease assignments are subject to local laws and regulations, which may vary by jurisdiction. It is important to ensure compliance with applicable laws and seek legal advice.

Key Terms for Legal Assignment Agreements

• Consideration: Refers to the value or benefit each party receives in exchange for entering into the assignment agreement.
• Assignment: The transfer of rights or obligations from one party (assignor) to another (assignee) as agreed upon in the assignment agreement.
• Consent: The requirement for obtaining permission or agreement from relevant parties, such as the original contracting parties, for the assignment to occur.
• Indemnity : The legal protection provided by the assignor to the assignee against any potential losses, liabilities, or claims arising from the assignment.
• Governing Law: The jurisdiction or legal system that governs the interpretation, validity, and enforcement of the assignment agreement, which is typically specified in the agreement itself.

Final Thoughts on Legal Assignment Agreements

A lease assignment agreement is a legally binding contract allowing tenants to transfer their lease rights and responsibilities to another party. It is important for both tenants and landlords to carefully review and understand the terms and conditions of a lease assignment, seek legal advice if needed, and maintain open communication throughout the process. By following the appropriate steps and considering potential risks and considerations, lease assignments can be a useful tool for tenants and landlords to manage their lease agreements effectively.

However, you need the help of a professional lawyer to ensure you do not end up messing up a lease assignment agreement. So, ensure you approach an experienced attorney who is well-versed in the field.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Property Lease Premium

Welcome to this comprehensive guide on “Property Lease Premiums.” In the world of real estate, property lease premiums play a significant role, but they can often be confusing for both landlords and tenants. 

This article will go through the notion of property leasing premiums, how they are calculated, the legal consequences, and much more. This article will give you with all of the necessary information, whether you are a property owner wishing to lease your property or a renter looking to understand the fees involved. Let’s have a look at property leasing premiums!

Table of Contents

What is a property lease premium.

A property lease premium, commonly known as a lease premium, is a lump sum payment made by a tenant to a landlord or property owner in addition to regular rent. It is usually paid upfront at the beginning of a lease agreement, and its purpose can vary depending on the specifics of the lease. Lease premiums are often a considerable financial commitment for tenants, as they are an upfront cost on top of the ongoing rent payments.

How is the Property Lease Premium Calculated?

Calculating the property lease premium involves various factors that both the landlord and tenant should consider. Some common elements taken into account are the property’s market value, the duration of the lease, and any additional benefits provided to the tenant. In some cases, the premium may be a fixed amount agreed upon between the parties, while in others, it could be a percentage of the property’s value

What Factors Influence the Value of the Property Lease Premium?

Several factors influence the value of a property lease premium:

a. Location: The property’s location is a significant determinant of the lease premium. Properties situated in prime locations or areas experiencing high demand will likely command higher premiums.

b. Market Conditions: The prevailing real estate market conditions and trends can affect the premium. In a competitive market, landlords may ask for higher premiums to capitalize on demand.

c. Property Type and Condition: The type and condition of the property also play a role. A well-maintained property or one with unique features may command a higher premium.

d . Lease Duration: The length of the lease is an essential factor. Longer lease terms may lead to a lower premium, as the landlord benefits from stable, long-term tenancy.

What are the Different Types of Property Lease Premiums?

There are two primary types of property lease premiums:

a. Upfront Lease Premium: This is the most common type, where the tenant pays a lump sum at the start of the lease agreement.

b. Reverse Lease Premium: In some cases, the landlord may pay the tenant a premium, commonly known as a reverse premium. This may occur in situations where the tenant brings significant benefits or value to the property, such as making substantial improvements or adding considerable value to the business.

Can Property Lease Premiums be Negotiated?

Yes, property lease premiums are often negotiable. Both landlords and tenants can engage in negotiations to reach a mutually acceptable premium amount. It’s essential for both parties to research the market and be aware of the property’s value and prevailing lease terms in the area.

Are Property Lease Premiums Refundable?

Generally, property lease premiums are non-refundable. Unlike a security deposit, which is refundable at the end of the tenancy, the premium is a one-time payment to secure the lease and is usually not returned to the tenant.

How are Property Lease Premiums Reflected in the Lease Agreement?

Property lease premiums should be clearly documented in the lease agreement. The lease document should specify the exact amount of the premium, the payment schedule, and any other relevant terms related to the premium.

What are the Legal Implications of Property Lease Premiums?

Property lease premiums have legal implications for both landlords and tenants. It’s crucial for both parties to understand their rights and obligations regarding the premium. In some jurisdictions, there may be specific laws or regulations governing lease premiums, so it’s essential to consult legal professionals for guidance.

Can Property Lease Premiums be Amortized Over the Lease Term?

In some cases, tenants may amortize the property lease premium over the duration of the lease. This means spreading the premium cost over the lease term instead of paying it all upfront. However, this is subject to negotiation and mutual agreement between the landlord and tenant.

Also read: SA105 form

How does the Payment of a Property Lease Premium Impact Taxation?

The tax treatment of property lease premiums can vary depending on the tax laws in the relevant jurisdiction. In some places, lease premiums may be treated as rental income for the landlord and may be subject to income tax. On the other hand, tenants may not be able to deduct the premium as an expense for tax purposes. It’s essential for both parties to seek professional tax advice to understand the tax implications fully.

Conclusion Property Lease Premium:

Property lease premiums are an important component of leasing contracts in the real estate business. They provide a chance for landlords to earn more money and recruit renters. They are an upfront financial commitment made by renters to obtain a desired home. It is critical for all parties to understand how property leasing premiums are computed, negotiated, and documented. Furthermore, consultation with legal and tax experts will ensure compliance with local legislation and assist in making educated judgments. Whether you are a landlord or a tenant, knowing about property lease premiums gives you the confidence and clarity you need to handle lease arrangements.

DISCLAIMER: We have written the UK accounting and tax related details for your information only. For professional advice or for any accounting task you require, you may need to speak to a professional accountant near you who can assist you. Please read our disclaimer for more details.

Commercial lease assignments: A guide for businesses

Business owners often consider commercial lease assignments to enhance flexibility, mitigate financial burdens, or adapt to evolving operational requirements. 

The work landscape, particularly in cities like London, is also evolving with the widespread adoption of remote and hybrid models, with many tenants seeking to streamline their footprints and reduce overhead costs.

Whether your business is looking for a more suitable space or navigating market fluctuations, this article will give you an overview of the lease assignment process and the essential legal aspects to consider.

What is the assignment of a lease?

The assignment of a lease refers to the legal process through which a tenant transfers their lease obligations and rights to another party, known as the assignee. This strategic move allows businesses to exit their premises before the lease term ends, with the assignee assuming responsibility for complying with the lease terms and obligations.

Businesses may consider lease assignment for various reasons, such as relocation, financial constraints, or changes in business needs. For instance, a company experiencing rapid growth may seek more extensive premises, making lease assignment an attractive option to exit the current arrangement.

What role does a solicitor play?

Understanding the legal complexities is vital when considering the assignment of a commercial lease. In this process, solicitors offer expert advice and can negotiate with the landlord to secure favourable terms within the assignment agreement, safeguarding the client's interests. 

Their pivotal role extends to drafting and finalising essential legal documents associated with lease assignments, such as:

• Licence to assign: A solicitor can assist in drafting this document, ensuring that it covers all necessary conditions and terms for the assignment, meets legal requirements, and protects the interests of both parties.  
• Rent deposit deed: Solicitors can draft the rent deposit deed, specifying the details of the deposit arrangement, its purpose, and the conditions under which the landlord can use the deposit, providing legal clarity for both parties.  
• Authorised guarantee agreement (AGA): Solicitors are instrumental in creating an AGA, outlining the legal commitment by the outgoing tenant to guarantee the new tenant's performance. They ensure that the agreement is comprehensive and legally sound, protecting the interests of the landlord and the outgoing tenant.

Avoiding the legal pitfalls of lease assignments

While every commercial lease assignment is unique, several legal aspects require careful consideration.

1. Leasehold covenants: Ensuring compliance 

Understanding leasehold covenants is essential in the lease assignment process as it involves recognising and complying with the agreed-upon obligations and restrictions outlined in the lease agreement. These covenants dictate how the property can be used, any alterations or improvements allowed, and other conditions the current and potential tenants must adhere to. 

For example, if a leasehold covenant stipulates that the premises can only be used for office purposes, you cannot assign the lease to a manufacturing company.

Failure to understand and meet these covenants could lead to complications, including the landlord's refusal to consent to the assignment or potential legal issues. Comprehending these covenants is essential for a smooth and legally compliant lease assignment.

2. Securing the landlord's consent: A prerequisite

Before proceeding with a lease assignment, obtaining the landlord's consent is paramount. This process involves submitting a formal request providing details about the proposed assignee and their financial stability.

While landlords cannot unreasonably withhold consent, specific lease terms may give them grounds to do so. Understanding the particular conditions for refusal is crucial, so it is important to seek legal advice as soon as possible.

3. Liabilities when assigning a commercial lease

Understanding liabilities when assigning a lease is crucial for business owners as it directly impacts their ongoing responsibilities and potential financial obligations. Transferring a lease doesn't automatically absolve the original tenant of all liabilities; they may still be held accountable if the new tenant defaults on payments or breaches lease terms. 

An authorised guarantee agreement (AGA) is a legal commitment often used in the context of commercial lease assignments. When a tenant assigns its lease to a new tenant, the outgoing tenant (assignor) may be required to provide an AGA. This agreement serves as a guarantee by the original tenant to the landlord, ensuring that the obligations of the new tenant (assignee) under the lease will be fulfilled.

The AGA means that if the new tenant defaults on the lease obligations, the outgoing tenant remains liable, guaranteeing the landlord a level of financial security. The original tenant can be pursued for any unpaid rent or other breaches of the lease terms by the new tenant. The AGA provides a legal mechanism for the landlord to seek redress from the outgoing tenant if issues arise with the assigned lease. 

Clear comprehension of these liabilities ensures informed decision-making and risk mitigation during the lease assignment process.

4. Navigating regulatory changes

The evolving regulatory landscape, particularly factors like Energy Performance Certificates (EPCs), can add additional challenges to lease assignments. For example, if you took on a lease before Minimum Energy Efficiency Standards (MEES) came into effect on April 1, 2018, the regulations did not apply at the time of the lease's inception. However, if you are now considering assigning the lease, MEES regulations would be applicable. 

A landlord may be less willing to agree to the lease assignment if it becomes essential to ensure that the property meets the required EPC standards to comply with the current regulations. 

5. Formalising with Land Registry: A vital step

Registering an assignment with the Land Registry is an important step in the lease assignment process. If a lease is granted with a term of over seven years, it must be registered to record the change of tenant officially. 

Failure to complete this registration can have significant consequences, including potential challenges to the validity and enforceability of the assignment. 

What are the alternatives to assigning a commercial lease?

When considering an exit from a commercial lease, it's crucial to recognise that assignment is just one of several options. Exploring these options is vital, and seeking guidance from a solicitor ensures a comprehensive understanding of the available choices.

• Assignment vs. subletting: Assignment involves permanently transferring your lease obligations to a new tenant. On the other hand, subletting a commercial property allows you to lease a part of your space to another party, retaining your responsibility for the entire lease.  
• Taking advantage of a 'break clause': A break clause is a provision in the lease allowing either party to terminate the agreement early, typically at predefined intervals. It provides a strategic exit, but conditions and notice periods must align with the lease terms.  
• Early termination with landlord's consent: Seeking your landlord's agreement to terminate the lease prematurely can be challenging. It requires negotiations and may involve financial considerations. Legal advice is essential to navigate this complex process and safeguard your interests.

Business owners can make informed decisions that align with their strategic objectives by understanding the intricacies, exploring alternatives, and leveraging legal expertise.

Commercial lease expertise

Our team of experienced commercial property solicitors is dedicated to guiding you through the lease assignment process. Every business has unique needs, so we offer tailored advice that aligns with your objectives. 

In addition to lease assignments, we can provide guidance on alternative options for ending a commercial lease, such as subletting, break clauses, and lease termination. 

With solicitors in London, Brighton, East Sussex, and Cumbria, we assist commercial landlords and tenants nationwide.

Looking to assign a commercial lease?

You might also like to read:

Subletting strategies: maximising flexibility in commercial leases, how to surrender a commercial lease: a guide for landlords and tenants.

How to end a commercial lease early: A quick guide

Repair clauses in commercial leases: what tenants need to know.

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Lease Assignment Agreement

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A Lease Assignment Agreement is a short document that allows for the transfer of interest in a residential or commercial lease from one tenant to another. In other words, a Lease Assignment Agreement is used when the original tenant wants to get out of a lease and has someone lined up to take their place.

Within a Lease Assignment Agreement, there is not that much information included, except the basics: names and identifying information of the parties, assignment start date, name of landlord, etc. The reason these documents are not more robust is because the original lease is incorporated by reference , all the time. What this means is that all of the terms in the original lease are deemed to be included in the Lease Assignment Agreement.

A Lease Assignment Agreement is different than a Sublease Agreement because the entirety of the lease interest is being transferred in an assignment. With a sublease, the original tenant is still liable for everything, and the sublease may be made for less than the entire property interest. A Lease Assignment transfers the whole interest and puts the new tenant in place of the old one.

The one major thing to be aware of with a Lease Assignment Agreement is that in most situations, the lease will require a landlord's explicit consent for an assignment. The parties should, therefore, be sure the landlord agrees to an assignment before filling out this document.

How to use this document

This Lease Assignment Agreement will help set forth all the required facts and obligations for a valid lease assignment . This essentially means one party (called the Assignor ) will be transferring their rights and obligations as a tenant (including paying rent and living in the space) to another party (called the Assignee ).

In this document, basic information is listed , such as old and new tenant names, the landlord's name, the address of the property, the dates of the lease, and the date of the assignment.

Information about whether or not the Assignor will still be liable in case the Assignee doesn't fulfill the required obligations is also included.

Applicable law

Lease Agreements in the United States are generally subject to the laws of the individual state and therefore, so are Lease Assignment Agreements.

The Environmental Protection Agency governs the disclosure of lead-based paint warnings in all rentals in the States. If a lead-based paint disclosure has not been included in the lease, it must be included in the assignment. Distinct from that, however, required disclosures and lease terms will be based on the laws of the state, and sometimes county, where the property is located.

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A guide to help you: Tenants and Subtenants Obligations under a Sublease Agreement

Other names for the document:

Assignment Agreement for Commercial Lease, Assignment of Commercial Lease, Assignment of Lease, Assignment of Residential Lease, Assignment Agreement for Lease

Country: United States

Housing and Real Estate - Other downloadable templates of legal documents

• Security Deposit Return Letter
• Rent Payment Plan Letter
• Residential Lease Agreement
• Sublease Agreement
• Tenant Maintenance Request Letter
• Rent Receipt
• Late Rent Notice
• Notice of Intent to Vacate
• Roommate Agreement
• Quitclaim Deed
• Parking Space Lease Agreement
• Short-Term Lease Agreement
• Tenant Security Deposit Return Request
• Termination of Tenancy Letter
• Change of Rent Notice
• Complaint Letter to Landlord
• Lease Amendment Agreement
• Notice of Lease Violation
• Consent to Sublease
• Eviction Notice
• Other downloadable templates of legal documents

Assignment of Lease Explained

• December 1, 2023

Understanding the complexities surrounding the assignment of a lease is crucial for both tenants and landlords. Within the UK, various situations might compel a tenant to transfer their lease to another party. In this guide we will delve into the essentials, helping you understand every facet of a lease assignment.

What is an Assignment of Lease?

In the world of property management and real estate, the concept of an “assignment of lease” is fundamental. It involves a tenant, known as the assignor, transferring their entire legal interest in a property to another individual or entity, called the assignee. This process is common in both residential and commercial contexts and plays a significant role in maintaining the fluidity of property interests, especially in a dynamic market.

When a tenant signs a lease, they agree to specific commitments, including paying rent and maintaining the property, which are enforceable for a set period. However, various circumstances may prompt a tenant to vacate the property before the lease term expires. Herein lies the importance of the assignment of lease.

Through lease assignment, the original tenant can exit the property and pass on the responsibility to a third party, who then assumes the role of the tenant with all its incumbent responsibilities. It’s important to note that while the new tenant steps into the shoes of the original tenant, the lease terms remain unchanged.

For instance, if an individual rents a flat and later decides to move out before the lease’s expiration due to reasons such as relocating for a job or changing living situations, they may opt for an assignment of the lease. This strategy allows another person to take over the living space and adhere to the responsibilities under the original lease, ensuring that the flat does not remain unoccupied and the landlord continues to receive rent payments. This seamless transition can be especially beneficial in residential areas with high demand for housing, as it minimises financial instability for the landlord and provides immediate accommodation for those in need of a home.

Key Components of Lease Assignment

• Assignor and Assignee: The existing tenant (assignor) and the new tenant (assignee) are the primary parties in this agreement. Their willingness to transfer and assume the lease’s obligations, respectively, drives the assignment process.
• Landlord’s Role: While not a direct party to the assignment, the landlord plays a pivotal role. Most lease agreements stipulate that landlords must provide consent before any assignment takes place. This clause protects the landlord’s interests, ensuring the new tenant is reliable and meets the required standards.
• Legal Documentation: The process requires several legal documents, including the initial lease agreement and a deed of assignment. The latter must clearly articulate that all rights and responsibilities have been transferred to the new tenant. This precision prevents future disputes regarding the terms of the lease.
• Liabilities: The assignment of lease doesn’t inherently absolve the original tenant of responsibilities. Depending on the agreement’s terms, the assignor might remain liable if the assignee fails to fulfil the lease obligations. This potential continued liability underscores the importance of thorough assignee vetting.

The Legal Ground

The legality surrounding the assignment of a lease is rooted in UK property law. It necessitates compliance with various statutory requirements and often involves complex legal procedures. Consequently, parties usually engage solicitors to ensure that the assignment aligns with legal protocols, protecting the interests of all involved parties.

The assignment of a lease is a nuanced process, influenced by factors unique to each situation. Whether prompted by personal, business, or financial changes, lease assignments facilitate flexibility in property occupancy and use. Understanding this concept is crucial for tenants seeking an early exit from a lease, individuals looking for established lease properties, and landlords wishing to maintain continuous tenancy and income streams.

Understanding the Deed of Assignment of Tenancy

A “deed of assignment tenancy” is a legal document that evidences the transfer of lease obligations from the current tenant to another. It is an essential part of the lease assignment process, binding the new tenant to the terms stated in the original lease.

Landlord’s Checks Before Permitting Assignment of a Lease

The assignment of a lease, while beneficial in maintaining continuous occupancy and consistent rent payments, necessitates thorough due diligence on the part of the landlord. Before consenting to an assignment, it’s imperative for landlords to conduct comprehensive checks, mirroring the depth of evaluation done during the initial tenant screening process. These checks are crucial in mitigating potential risks and safeguarding the landlord’s investment.

Detailed Assessment of the Prospective Assignee

Landlords should ascertain the financial stability and reliability of the assignee. This assessment often involves:

• Credit Checks: This allows landlords to have a clearer understanding of the prospective assignee’s credit history, highlighting their ability to keep up with regular rent payments and financial commitments.
• Employment Verification: Landlords typically require proof of ongoing, stable employment. This verification helps ensure that the new tenant has a consistent income stream capable of covering the rent and other associated costs.
• References: Previous landlords or property managers can provide insights into the assignee’s behaviour, paying habits, and overall reliability. Personal references might also be necessary to form a more comprehensive view of the prospective tenant.

Review of the Assignee’s Intent

Understanding the prospective tenant’s reasons for seeking the property and their long-term intentions can provide reassurance. For instance, landlords should feel more comfortable knowing that the assignee plans to reside in the property for an extended period and doesn’t intend to sublet without permission or engage in unlawful activities.

Examination of Financial Documentation

Landlords may request documentation such as bank statements or savings accounts to further verify the assignee’s ability to afford the property. This scrutiny is particularly pertinent in higher-rent areas or for properties with higher maintenance costs.

Ensuring Contractual Compliance

It’s important for the landlord to confirm that the assignee understands and agrees to the terms set out in the original lease. The assignee must comply with all existing conditions, and any deviation needs to be negotiated with and approved by the landlord.

Legal Considerations

Given the legal complexities surrounding lease assignments, landlords often seek legal advice during this process. Lawyers can help ensure that the assignment adheres to local property laws, the original lease’s terms, and that the landlord’s interests are thoroughly protected throughout the transition.

By conducting these comprehensive checks, a landlord exercises due diligence, significantly reducing the likelihood of issues arising from the assignment of the lease. This meticulous approach helps maintain the property’s revenue stream, upholds community standards, and ensures the continued preservation and value of the property investment. It’s a proactive measure, providing the landlord with peace of mind that they are handing over their property to a reliable and responsible assignee.

Costs Involved in Lease Assignment

The process of lease assignment, while a practical solution for tenants looking to transfer their lease obligations, does entail various costs that both the assignor (original tenant) and assignee (new tenant) need to consider. These expenses contribute to a seamless transfer process, ensuring all legalities are properly managed, and all parties are adequately protected. Understanding these costs is essential as it prevents unexpected surprises and allows for a more transparent transaction.

Costs for the Assignor

• Advertising Costs: If the landlord does not immediately have a new tenant, the original tenant may need to advertise the property. This could involve online listings, printed materials, or hiring an estate agent to expedite the process, all of which incur costs.
• Tenant Screening Costs: The assignor might opt to conduct preliminary screenings of potential assignees, which include credit checks, reference checks, and other background investigations to ensure they’re presenting a reliable tenant to the landlord.
• Legal Fees: The legal intricacies of transferring a lease require the involvement of legal professionals. The assignor typically bears the cost for legal consultations, drafting the deed of assignment, and any related legal documentation.
• Landlord’s Administrative Fees: Some landlords charge an administrative fee for processing a lease assignment, covering the time and resources they expend to conduct their checks and modify their records.
• Potential Liability Costs: If the assignee fails to meet the lease obligations, and depending on the terms of the assignment, the original tenant may remain partially liable. This contingent liability could lead to future costs.

Costs for the Assignee

• Security Deposit: It’s standard practice for the new tenant to provide a security deposit before moving in. In some cases, the assignee reimburses the original tenant for the initial deposit, depending on its condition and any agreement between the parties.
• Advance Rent: The assignee may need to pay the first month’s rent in advance, similar to standard leasing arrangements.
• Legal Fees: Assignees also incur legal fees. They need legal counsel to review the terms of the lease, ensure the assignment is conducted correctly, and understand their new responsibilities and liabilities.
• Stamp Duty: Depending on the property’s value and the lease’s remaining duration, the assignee might need to pay Stamp Duty Land Tax (SDLT) on the premium or the rent of the lease.

Shared Costs

In some instances, both parties negotiate and equally share specific costs, such as those for legal consultations, to ensure fairness and mutual satisfaction in proceeding with the transaction.

Both assignors and assignees must factor in these expenses to accurately assess whether a lease assignment is a financially viable option. It is advisable to consult with real estate professionals and legal advisors to understand all potential charges fully. Having a clear, upfront understanding of these costs allows both parties to make informed decisions, ensuring a smooth, transparent, and fair transition process.

Does Assignment Create a New Tenancy?

No, an assignment does not create a new tenancy. It merely transfers the existing tenant’s rights and obligations to the new tenant, who then steps into the shoes of the original tenant under the same lease terms.

The Necessity of Legal Assistance

It is highly advisable to engage a solicitor during the assignment of a lease. A solicitor can provide necessary legal advice, prepare the deed of assignment of lease, and ensure compliance with various property and contract laws.

Deed of Assignment vs Tenancy Agreement

While they might sound similar, a deed of assignment is not the same as a tenancy agreement. The former refers to the document transferring existing lease rights to a new tenant, while the latter is a contract outlining the terms between a landlord and tenant for new occupancy.

Parties Involved in Signing the Deed of Assignment

The deed of assignment of lease is typically signed by the outgoing tenant, the incoming tenant, and sometimes, the landlord, especially when their consent is a prerequisite for the lease transfer.

Landlord’s Consent to Lease Assignment

A landlord can refuse to consent to assign a lease, but this refusal must be reasonable. Scenarios for justifiable refusal might include the prospective tenant’s inability to meet financial commitments or proposed use of the property that violates lease terms.

Lease Assignment vs Subletting

• Lease assignment involves the complete transfer of the tenant’s rights to another party.
• Subletting occurs when the tenant temporarily hands over the property rights to another party but retains some rights or eventually plans to return.

Financial Responsibilities in Lease Assignment

Typically, the outgoing tenant or the incoming tenant covers the costs related to the assignment of lease, such as legal fees, administrative charges, and any leasehold improvements. The specific arrangements may vary based on mutual agreements.

Assigning a Lease Without a Deed: Is It Possible?

No, a lease assignment must be evidenced by a deed to be legally binding. The deed of assignment tenancy is crucial as it protects the interests of all parties involved and provides legal clarity.

The Meaning of ‘Assignment’ in Rent Context

In the context of renting, ‘assignment’ refers to transferring the existing tenant’s lease obligations and rights to another party. The assignee assumes responsibility for rent payments and adherence to the lease terms.

Advantages of Assigning a Lease

There are several benefits associated with the assignment of a lease, including:

• Flexibility for the tenant needing to vacate the property before lease termination.
• Minimal interruption in rent payments for the landlord.
• Opportunity for another tenant to occupy the premises without having to negotiate a new lease.

Stamp Duty and Lease Assignment

Stamp duty on assignment of lease may apply depending on the premium paid and the lease’s yearly rent. It’s important to consult a solicitor to understand any potential tax implications.

Post-Assignment Liabilities for Tenants

After the assignment of a lease, the original tenant is generally released from future liabilities. However, they may remain liable if the new tenant defaults, depending on specific lease terms or if guarantees were provided.

Essential Documents for Lease Assignment

In the process of a lease assignment, several critical documents must be prepared, reviewed, and signed to ensure a legally binding transfer of rights and responsibilities from the original tenant (assignor) to the new tenant (assignee). These documents are crucial in defining the terms of the assignment, protecting the interests of all parties involved, and complying with legal standards. Here are the essential documents required for a successful lease assignment:

1. The Original Lease Agreement

• Before any transfer, all parties must review the original lease. It’s vital to understand any clauses or terms that could impact the assignment, such as conditions requiring the landlord’s consent for any lease transfer.
• The original lease agreement serves as the foundation for the assignment, outlining the terms and obligations that the assignee will need to adhere to.

2. Deed of Assignment of Lease

• This legal document formally transfers the lease obligations from the assignor to the assignee. It must clearly state the terms under which the lease is assigned, including any continuing liabilities of the assignor, if applicable.
• It should be comprehensive, detailing the rights and responsibilities of all parties and any guarantees provided by the assignor.
• The deed is usually drafted by a solicitor to ensure that it complies with legal standards and adequately protects everyone’s interests.

3. Landlord’s Consent to Assignment

• Most leases require the landlord’s formal approval for any assignment to occur. This document is the landlord’s written agreement, permitting the transfer from the current tenant to the new one.
• It may come with conditions the assignee must satisfy, which should be clearly outlined in the consent form.

4. Assignee’s Letter of Acceptance

• This document is proof that the assignee understands and agrees to the terms set out in the original lease and the deed of assignment.
• The letter may restate key lease terms for clarity and will affirm the assignee’s commitment to abide by all the lease conditions and responsibilities.

5. Legal Advisories

• Though not a formal part of the lease assignment, documentation of legal advice received by both the assignor and assignee (and possibly the landlord) is crucial.
• These advisories ensure each party has been informed of their legal rights and obligations, potentially offering protection in the event of future disputes.

6. Inventory List

• If relevant, an inventory list detailing the condition of the property, especially for furnished rentals, would be necessary. This document helps manage expectations and responsibilities concerning the property’s state and contents at the time of the assignment.

7. Proof of Assignee’s Financial Stability

• While not always formally part of the assignment documentation, evidence of the assignee’s ability to meet financial commitments (like bank statements or employment confirmation) often needs to be submitted to the landlord during the assignment process.

The process of assigning a lease is a complex legal transaction that requires strict adherence to procedural standards. These essential documents ensure that the assignment progresses smoothly, with clear understanding and agreement from all parties involved. Both assignor and assignee should seek legal counsel to ensure their interests are protected, and all documents are in order, further underscoring the importance of each document’s role in this pivotal real estate process.

Energy Performance Certificate (EPC) Requirements

Yes, an EPC is generally required for a lease assignment, especially if the building is to be sold or rented out. This certificate ensures that the property meets the necessary energy efficiency standards.

Registering an Assignment of Lease

Registration of an assignment of lease is crucial. It validates the change of tenant under the lease, making it legally binding and enforceable. This process usually involves submitting the deed of assignment to the appropriate land registry.

Timeframe for Assigning a Lease

Assigning a lease can take anywhere from a few weeks to several months, depending on factors like obtaining the landlord’s consent, the new tenant’s credibility, and the speed of legal processes.

Embracing the Benefits of Lease Assignment

Whether you’re a tenant seeking flexibility or a landlord desiring continued occupancy, lease assignment offers solutions that can cater to your individual needs, promoting ease and continuity in the leasing process.

If you’re considering a lease assignment, it’s paramount to seek professional advice to navigate the complexities involved. The information contained in this article should be used for information purposes only and should not be relied upon in place of specific legal advice.

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Assignment of a lease

Assignment of a long lease, assignment of a short lease, grant of a lease, grant of a long lease, grant of a short lease, acca guide to... getting out of a lease.

A property lease is basically a right to use an asset. A lease is a contract by which one party (lessor) gives the use and possession of land and building to another party (lessee) for a specific period of time, usually in return for a specific rent.

This contrasts with a licence, which entitles a person (licensee) to the use of the property, but which is subject to termination at the will of the owner of the property (licensor).

Leases usually run for many years, while licences cover a relatively short period of time (up to two years).

The key point in determining the tax treatment of a lease transaction is to establish whether there is an assignment of a lease or a grant of a lease.

An assignment of a lease is the legal term used for the sale of a lease. On assignment, the owner relinquishes rights over the property.

A grant of a lease is the creation of a new asset. The person who owns the property grants a lease to a tenant for a specific period of time; however, the rights in the property will eventually revert back to the freehold landlord.

The tax treatment on the assignment of a lease depends on whether the taxpayer is selling a long or  short lease.

A long lease is a lease that has more than 50 years to run at the date it was sold; a lease with less than 50 years to run is a short lease.

The capital gains tax (CGT) computation on the assignment of a long lease is quite straightforward; the original cost is deducted from the proceeds and the resulting gain is then subject to CGT (after the annual exemption).

The CGT computation on the assignment of a short lease is slightly more complex.

A lease with a useful life of less than 50 years is called a ‘wasting asset’. As wasting assets depreciate over time, the allowable base cost for CGT purposes is calculated using the lease depreciation tables (Schedule 8 Paragraph 1, TCGA 1992).

The allowable base cost is the original acquisition cost multiplied by the fraction S/P, where: 

• ‘S’ is the percentage from the lease depreciation table for the years of the lease remaining at the date of assignment
• ‘P’ is the percentage from the lease depreciation table for years of the lease remaining at the date of purchase. 

For example:

Sarah purchased a 42-year lease for £100,000 in January 2000. In January 2012, she sells the lease for £150,000.

As 12 years have passed since original acquisition, Sarah is selling a lease with 30 years left to run.

From the proceeds of £150,000, we deduct the allowable base cost (which is the original acquisition cost multiplied by the fraction S/P).

From the lease depreciation table, the relevant percentage for a 42-year lease is 96.593 and for a 30-year lease the relevant percentage is 87.33.

The capital gain is therefore:

Proceeds: £150,000

Allowable cost:

100,000 x 87.33/96.593 (90,410)

Gain: £59,590

A long lease will become a short lease once less than 50 years are remaining.

Louise bought a 60-year lease on 1 January 1990 for £90,000. She sells the lease on 1 January 2010 for £120,000.

As 20 years have passed since original acquisition, Louise is selling a lease with 40 years left to run.

Accordingly, Louise is selling a short lease and we need to refer to the lease depreciation tables.

The percentage for 50 years or more is always 100, and the percentage for a 40-year lease is 95.457.

Proceeds: £120,000

90,000 x 95.457/100 (85,911)

Gain: £34,089

As with the assignment of a lease the tax implication on the grant of a lease depends on the length of the lease granted.

Where a freeholder grants a long lease to a tenant, CGT is calculated by using the part-disposal formula:

The allowable cost is the acquisition cost multiplied by the fraction A/(A+B), where:

• ‘A’ is the gross amount of the premium paid
• ‘B’ is the value of the remainder or the reversionary interest. 

Rose grants a 55-year lease on a freehold property which she purchased in 2000 for £100,000.

She receives a premium of £150,000 from the leaseholder. The value of the freehold reversion is £200,000.

Premium: £150,000 

100,000 x 150,000/(150,000+200,000) (42,857)

Gain: £107,143

The premium received from the grant of a short lease must be split between the amount chargeable to income tax (under property income rule ITTOIA 2005 S 277 (4)) and the amount chargeable to CGT.

The capital element chargeable to CGT is 2 per cent x (N-1) x P, where:

• ‘N’ is the number of years of the lease
• ‘P’ is the premium received. 

The grant of a lease out of a freehold is treated as a part-disposal; accordingly, allowable cost is calculated as the acquisition cost multiplied by the fraction a/(A+B), where:

• ‘A’ is the gross premium paid
• ‘B’ is the reversionary interest
• ‘a’ is the part of the premium that is chargeable to CGT. 

Elizabeth bought a freehold property 20 years ago for £50,000. In 2010, she granted a 40-year lease for a premium of £100,000, the reversionary interest being £200,000.

We first need to split the premium of £100,000 into the amount subject to income tax and the amount subject to CGT:

The capital element is 2% x (40-1) x £100,000 = £78,000.

The amount chargeable to income tax (as property income) is the difference between the premium received and the amount charged to CGT (£100,000-£78,000 = £22,000).

The capital gain is as follows:

Capital element of the premium: £78,000

Less allowable cost:

50,000 x 78,000/(100,000+200,000) (13,000)

Gain: £65,000

The above only looks at tax implications on assigning or granting of a lease; however, there might be legal implications if the taxpayer wishes to get out of a lease agreement before the end of the term.

This guide can be downloaded from the 'Related documents' section on this page.

Related documents

Related links.

TCGA 1992: Schedule 8, Paragraph 1

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Premiums and reverse premiums for commercial leases

Premium and reverse premiums in leases and assignments of leases.

• Practical Law

New Checklist: Assignment of a lease

Practical law uk legal update 5-201-6723  (approx. 3 pages).

• Determine which steps are relevant to their particular transaction.
• Make sure that elements of the procedure for assignment of a lease are not overlooked.
• Identify potential issues arising from the review of the existing leasehold documentation.
• Assignments, Variations, Surrenders and Termination: Land and Buildings
• Conveyancing Procedure

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Premiums For The Grant Of A Lease – The Tax Treatment Explained

When the owner of the freehold of a property grants a lease to a new tenant, it is not unusual for the tenant to pay a lump sum up front, as well as agreeing to pay an amount of rent monthly or quarterly during the term of the lease. Such an upfront payment is usually known as a “premium”. Note that here we are talking about the grant of a new lease from the landlord to the tenant, not the “assignment” of an existing lease from one tenant to another, for which the rules are different.

The tax treatment of a premium depends on the length of the lease concerned:

•  For leases of less than two years, the premium is simply treated as additional rent;
• For leases of more than 50 years, the premium is treated as a payment for a disposal of part of the property, giving rise to a capital gain in the hands of the landlord;
•  For leases of between two and 50 years, the treatment is more complicated, and works by splitting the premium into two payments – one of rent, and the other of a capital sum.

The latter calculation is quite simple. Take the number of complete years in the term of the lease, deduct one year, and multiply the result by 2%. This gives you the capital gains element of the premium, and the balance of the payment is rent.

For example, if Mr Jones pays a premium of £10,000 for a twenty-one year lease of a shop, the capital element is £4,000. Twenty times 2% is 40%, and 40% of £10,000 is £4,000. The other £6,000 is treated as rent.

If the tenant is able to deduct the rent he pays from the income of a business, as can Mr Jones the shopkeeper, he can also deduct the “rent” element of the premium he has paid.

Because the lease is for twenty-one years, Mr Jones can deduct £286 (£6,000 divided by 21) each year from his income from trading in the shop, as if it were rent, in addition to the actual rent he pays. The landlord who granted the lease, however, is treated as receiving £6,000 rent in the first year, again in addition to the actual rent he receives.

This treatment does not only apply to cash premiums paid for leases. It is quite common for a lease to be granted on the basis that the tenant agrees to do work on the property instead of paying a cash sum. In such a case, the landlord is treated as if he had received a premium equivalent to the benefit of the work done by the tenant under the terms of the lease.

The legislation says that the “premium” here is the increase in value of his interest in the property immediately after granting the lease, as compared with what the value would have been if the tenant had not been required to do any work.

Practical Tip

Calculating this is not a simple as it sounds.  The first point is that the increase in value, not the cost of the work, is the relevant figure. It is also necessary to consider the length of the lease, because the landlord will only get the benefit of the improvements when the lease ends and he can take possession of the property again. Finally, these rules only apply if the landlord could not have claimed a deduction from his rental income for the work done, if he had done it himself, so for example, routine repairs will not give rise to a charge.

James Bailey

When the owner of the freehold of a property grants a lease to a new tenant, it is not unusual for the tenant to pay a lump sum up front, as well as agreeing to pay an amount of rent monthly or quarterly during the term of the lease. Such an upfront payment is usually known as a “premium”. Note that here we are talking about the grant of a new lease from the landlord to the tenant, not the “assignment” of an existing lease from one tenant to another, for which the rules are different.

•  For leases of less than two years, the premium is simply treated as additional rent;
•  For leases of between two and 50 years, the treatment is more
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Property Income Manual

Pim1202 - premiums: definition of a premium, what is a premium.

A lease is sometimes granted on terms that require the payment of both:

• a premium: a lump sum, and
• rent: regular payments.

In other instances, the lease may require only the payment of rent.

A premium is a sum paid on the creation of an interest in property. As such it is capital on normal principles. This led to landlords seeking premiums instead of rent to avoid tax. To counter this, legislation was introduced:

• For Income Tax customers: ITTOIA05/S277-283
• For Corporation Tax customers: CTA09/S217-223

Premiums are more common in some parts of the country than others and you may meet them more often in respect of large commercial and industrial properties.

In Scotland, any provision relating to a premium also includes a grassum.

An Inspector should deal with any point involving premiums on leases and similar payments.

Difference between a premium and rent

A distinction is made between:

• a premium paid for the grant of a lease, and
• rent due under the lease.

Confusion can arise in certain unusual cases where rent is payable in advance and so looks like a premium at first sight. For more about unusual patterns of rental payments see PIM1102 .

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