Assignment and underletting

Restrictions on alienation

Forms of alienation covenant

In the absence of any provision in the lease to the contrary, a tenant has the right to assign its interest in the lease and to create subleases. It is, however, a rare lease which does not restrict the tenant's freedom in this respect. Restrictions on alienation generally take the form of covenants on the part of the tenant prohibiting certain types of dealing. Such prohibitions may be 'absolute', 'qualified' or 'fully qualified' in form.

An absolute covenant (one that prohibits an action without allowing for landlord’s consent) is a complete bar if it covers the proposed transaction.

A qualified covenant prohibits a transaction without the landlord’s consent (but without requiring that the consent should not be unreasonably withheld). However, section 19(1)(a) of the Landlord and Tenant Act 1927 imports that requirement into any covenant that requires landlord’s consent for assigning, underletting, charging or parting with possession and applies ‘notwithstanding any express provision to the contrary’. Such covenants are therefore ‘fully qualified’.

In addition, qualified covenants in certain building leases are of no effect

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Property Disputes News

Property Disputes weekly highlights—14 August 2025

This week's edition of Property Disputes weekly highlights includes: analyses of Court of Appeal decisions declaring a right to manage claim notice invalid for procedural non-compliance and interpreting a local authority’s discretionary succession policy, a High Court decision that resuscitating a conceded lease construction point is an abuse of process and an Upper Tribunal decision allowing partial modification of a restrictive covenant.

Insolvency, declarations of trust, loan agreements, artificial asset protection, sham transactions, transactions defrauding creditors, interspousal asset transfers, change of position defence and wife’s entitlement to share of husband’s assets (Sayers v Dixon)

Restructuring & Insolvency analysis: The court held that six declarations of trust (DoTs) executed by the transferor (Mr Dixon) in favour of his wife (Mrs Dixon) constituted transactions defrauding his creditors within the meaning of section 423 of the Insolvency Act 1986 (IA 1986) and that two of them, purporting to transfer all his future assets and income to Mrs Dixon, along with an accompanying loan agreement, were shams which were void and ineffective. It set aside the DoTs and ordered Mrs Dixon to restore the value of three transferred properties (which had been converted into £551,589 cash) to Mr Dixon’s trustees in bankruptcy (trustees) together with interest of £101,726. It also ordered an account to be taken of the funds that had been transferred to Mrs Dixon or on her behalf by Mr Dixon over the seven years between the date of the DoTs and his bankruptcy. The court dismissed Mrs Dixon’s defence of change of position to the trustees’ claim for restoration, finding that even if such a defence were generally available (which is unclear), she had not acted in good faith and could not rely on it. It also dismissed her defence that, having been married to Mr Dixon for many years, she was entitled to half his assets and/or an entitlement to a share of them by virtue of a right to be maintained. Written by Jonathan Lopian, barrister at New Square Chambers, who acted for the successful claimants.

Court of Appeal on right to manage, strict procedural compliance and equitable tenancies (Avon Freeholds Limited v Cresta Court E RTM Company Ltd)

Property Disputes analysis: The Court of Appeal held that a right to manage (RTM) company’s claim notice was invalid because the company failed to comply with section 78(1) of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002) as it failed to serve an equitable long lessee with a notice inviting participation (participation notice) before serving the claim notice. The Court upheld the Upper Tribunal (UT) (Lands Chamber)’s decision that a tenant of an equitable long lease during the ‘registration gap’ is a ‘qualifying tenant’ within s 75 2002 Act, provided that there is no legal titleholder of that lease. However, the UT had erred in holding that the failure to serve that qualifying tenant with the participation notice did not render the claim notice invalid on the facts of the specific case. Instead, strict compliance is required upon a proper interpretation of the statute, in particular ss 78(1) and 79(2). Written by Sophie Gibson, barrister at Landmark Chambers, junior counsel for the Appellant.

Property Disputes weekly highlights—7 August 2025

This week's edition of Property Disputes weekly highlights includes: analyses of Court of Appeal decisions dismissing an unmeritorious tenancy deposit claim and on the retrospective enforcement potential of the Building Safety Act 2022, an Upper Tribunal decision on recovering housing benefits paid to a landlord, and a further Court of Appeal decision relating to the definition of ‘stepchild’ under a Council’s tenancy succession policy.

View Property Disputes by content type :

News