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