Q&As

If a group company pays rent due under a lease, would this amount to the sharing of the premises with that company or an assignment of the tenant's interest?

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Published on LexisPSL on 05/09/2017

The following Property Q&A provides comprehensive and up to date legal information covering:

  • If a group company pays rent due under a lease, would this amount to the sharing of the premises with that company or an assignment of the tenant's interest?

This Q&A considers the issue of the scope of covenants in commercial leases which restrict the extent to which the tenant can give third parties a right to the use the demised premises, be it by informally allowing them into occupation alongside it or assigning the interest.

It is common for a landlord to seek to restrict the tenant’s ability to deal with the lease. Having chosen to grant a lease to a particular tenant, the landlord will not necessarily want to have to deal with a third party not of its choosing. Accordingly, it is common for a lease to contain a covenant restricting the ability of the tenant either to part with possession of the premises or to assign the lease. That restriction might be absolute or subject to a requirement that permission be obtained first.

This Q&A considers the scope of such a restriction. First, it is necessary to construe the covenant itself as only then that one can determine whether any state of affairs breaches it. There is little difficulty in construing the meaning of an assignment. Absent further limitation, it will only restrict a legal assignment rather than one taking effect in equity or by way of a charge. This distinction will be important, however, in the case of the assignmen

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