The following Property guidance note provides comprehensive and up to date legal information covering:
Offer back (sometimes known as surrender back) clauses oblige the tenant to offer to surrender the lease to the landlord as a pre-condition to the tenant’s right to assign and/or underlet. The right to assign/underlet only arises if the landlord declines the tenant’s offer. In substance it is a right of pre-emption (sometimes called a right of first refusal).
Offer back clauses enable the landlord to veto any assignment/underletting and require the tenant to vacate the property. If the tenant is obliged to offer to surrender for no consideration, the landlord can take advantage of a rise in rents, by accepting the surrender and re-letting at the market rent. However, landlords should be warned that:
the inclusion of an offer back clause may have an adverse impact at rent review (depending upon its terms), and
if the tenant is a company, subject to the terms of the lease, it may be possible for the parties to circumvent the offer back clause by the assignee acquiring the shares of tenant instead of taking an assignment of the lease
Offer back clauses can be disadvantageous to tenants because:
the lease may be more difficult to market
if the time periods for the offer back clause will take significant time to comply with, the tenant may lose a potential assignee
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