Assignation
Assignation, in terms of a lease, is the transfer by the tenant of its interest under the lease to another party ("Assignee"). It is completed by way of a deed called an assignation which usually contains provision for all of the tenant's obligations to be transferred to the Assignee. An assignation is not binding on the landlord until it has been formally intimated to the landlord.
On completion of a valid assignation, the outgoing tenant will cease to have any liability for the obligations under the lease, except if:
- the lease provides for the original and subsequent tenants to have joint and several liability for the tenant's obligations under the lease - which would be unusual in a lease of Scottish property; or
- any obligations have been specifically carved out of the assignation and left with the former tenant.
Assignation is the best route for a tenant who wishes to vacate the whole of the property - unless there is a value in the lease that could be obtained by sub letting at higher than the rent currently payable under the lease. But even then, most tenants just want out.
Sub letting
Alternatively, a tenant could grant a sub lease of the property. In a sub let, the tenant (without renouncing or otherwise terminating its interest as tenant), grants a lease "down the line" to another person. As between the tenant and the sub tenant, a sub lease entitles the sub tenant to actual occupation of the property (in place of the tenant).
However, unlike in the assignation situation, this route does not get the tenant out of its obligations to the landlord. The tenant will remain fully bound by the terms of its lease (often, in such cases, then called the head lease), even where the whole of the property is sublet and the tenant is not actually in occupation.
A tenant should ensure that the terms of the sub lease that it grants are sufficient to require the sub tenant to comply with all of the tenant's obligations up the line to the (now head) landlord, under the head lease. A sub lease is usually, but not always, on the same terms as the head lease to ensure that all tenant's obligations are "back to backed" onto the sub tenant. If, for any reason, the sub tenant breaches the sub lease (e.g. by failing to pay the sub lease rent to the tenant), the tenant will still be stuck having to pay its rent up the line to the landlord - and will simply be left with a claim against the sub tenant (if it is worth suing).
Sharing possession
In some cases it might be possible to share possession with someone. If e.g. the tenant still wants to trade from the property, but is not fully using all of the space, it might allow someone else to share the space. This could, of course, be achieved by a partial sub letting but can also be done by a space sharing arrangement.
Common law position
At common law the rule is that a tenant has an implied right to assign its interest in a lease or to sub-let the premises without the landlord's consent - unless there was something special about the tenant that influenced the landlord's decision to let to it (this being known as delictus personae).
In practice however, there is rarely the opportunity to argue that there is no delictus personae as most leases overrule the common law by expressly requiring that landlord's consent is required to assigning, sub letting and parting with or sharing possession.
Landlord's wants v. tenant's needs
Landlords and tenants have different concerns on this issue.
A landlord wants to prevent a tenant from having complete discretion to assign, sub-let or otherwise part with or share possession - as landlords want some certainty over who is occupying their property, firstly to ensure that the tenant can afford the rent and other payments and secondly to control the type of person or business who is occupying their property. On the other hand, an unduly restrictive alienation clause can impact adversely on a landlord at rent review.
Clearly, tenants want maximum flexibility, so that if they want to change premises they can do so without needing to obtain landlord's consent.
The usual compromise is to allow assignation or sub letting with the consent of the landlord, provided such consent is not unreasonably withheld or delayed. Permitting assignation or subletting with the landlord's consent, allows the landlord to vet an incoming tenant or sub tenant to ensure that it is a respectable and responsible occupier of sufficient financial standing to pay the rent and comply with the other lease obligations. It also ensures the value of the landlord's asset remains unaffected.
Such a compromise is often accompanied by the grant of automatic permission (without having to apply for landlord's consent) for sharing occupation with a company in the same group of companies as the tenant.
