Solicitor Ed Williams, in our Commercial Property & Planning team, explains what a Deed of Assignment in Commercial Property is.
A Deed of Assignment is a formal legal document used to transfer a tenant’s interest in an unregistered commercial lease from the outgoing tenant (the assignor) to the incoming tenant (the assignee). The document therefore effectively facilitates the transfer of the remainder of the leases contractual term to the assignee.
Where the lease is registered, the transfer must instead be completed by a TR1, rather than a Deed of Assignment.
How does a Deed of Assignment fit in?
Once the landlord has agreed in principle to the assignment, their solicitor will prepare the Licence to Assign (and accompanying documentation as appropriate), which will then be negotiated and agreed between the landlord, the assignor, and the assignee. The assignee’s solicitor should simultaneously prepare the Deed of Assignment. The document will then be negotiated and agreed between the assignor and assignee.
After documentation is agreed, completion of the Deed of Assignment can take place at the same time as the Licence to Assign, although the parties may choose to delay completion depending on the circumstances of the transaction.
Following completion, the assignee may need to serve a notice of assignment on the landlord, confirming that the assignment has taken place alongside a notice fee and typically a certified copy of the Deed of Assignment.
Keys terms to consider
When negotiating a Deed of Assignment, the following points should be considered:
- Premiums or Other Payments: Any amounts payable between the assignor and assignee, should be clearly recorded.
- Apportionment of Costs: The parties should agree how rent, service charge, insurance rent, and other recurring sums will be apportioned on completion.
- Fixtures, Fittings, and Chattels: Clarify what is and what is not included in the assignment so both parties understand exactly what the assignee will take over.
Transactional concerns
When taking an assignment the assignee should consider:
- Whether an Assignment is Appropriate: the landlord might consider whether negotiating a new lease might be more appropriate than an assignment of the existing lease.
- Who is responsible for Arrears: if the assignor’s arrears are not being dealt with prior to completion the assignee should ensure they do not become liable for them.
- Any Supplementary Documentation: the assignor may be required to provide an Authorised Guarantee Agreement and/or an assignee may be required to provide a rent deposit, and the terms of these deeds should be checked and negotiated in the usual way.
Conclusion
A well-drafted Deed of Assignment gives certainty to all parties and helps ensure a smooth transition from the outgoing to the incoming tenant. It protects the landlord’s position, reduces the risk of future disputes, and confirms the rights and obligations that the assignee is taking on. Given the complexities involved, we always recommend that a party seeks specialist legal advice before entering into a Deed of Assignment.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
