Introduction

A sub-letting of the whole term operates as an assignment. An assignment is different to a sub-letting because the estate in land is transferred from the first tenant to the new tenant. However, an assignment by a tenant is ineffective to pass the tenant’s legal estate to the proposed assignees unless it is made by deed [s52(1) Law of Property Act 1925 and Crago v Julian [1991] EWCA Civ 4]. A deed is not required if the landlord expressly or impliedly agrees to the assignees becoming the tenant and accepts him in place of the former tenant [Crago v Julian [1991] EWCA Civ 4], in which case it is not an assignment but a surrender and re-grant of the tenancy.

Under the Unfair Terms in Consumer Contracts Regulations 1999, section 19(1) Landlord and Tenant Act 1927 and Landlord and Tenant Act 1988, an assured shorthold tenancy (or any other type of standard tenancy) which contains a term in the tenancy prohibiting assignment without consent, it is an implied term that the landlord will not unreasonably withhold that consent.

It would seem, neither Landlord and Tenant Act 1927 or 1988 are implying a term that a tenant may assign or sub-let. They are referring to the part that requires consent. It is submitted that if the term simply prohibits assignment or subletting and there is no provision for consent to be given (whether reasonably or not), then, the Acts’ do not apply. However, according to the Office of Fair Trading guidance on unfair terms, such a term absolutely prohibiting assignment would be contrary to the Unfair Terms Regulations – see page 107 for example. (It is submitted on a short tenancy such as 3 months, the view of the OFT is incorrect and that such a term would not contravene the regulations although we now recommend 6 month fixed terms).

Where a clause allows assignment subject to consent, a landlord may require the outgoing tenant to act as a guarantor for the new incoming tenant [section 16 Landlord and Tenant (Covenants) Act 1995].

Assignment mainly occurs in commercial leases but can happen with a residential tenancy. Most of the case law quoted on this page refers to commercial leases but there is no reason why it would be different to residential (except the last case at the bottom where the damages awarded to the tenant would be nothing like those in that case)

There is no hard and fast answer as to what is withholding reasonable ... Please login or signup to continue reading this content

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