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Arrears and assignment

This content applies to England

Whether an assignee is liable for rent arrears accrued by the former tenant, and whether the original tenant is liable for rent arrears accrued after assignment.

Liability for former tenant's arrears

An assignee is not legally liable to meet the contractual terms of the original tenant's agreement with the landlord where the liability arose before the assignment. Thus, an assignee is not liable for rent arrears that accrued before s/he took over the tenancy.[1] The original tenant (the assignor) is the only person who can legally be sued for any arrears existing at the time of assignment. In practice, some local authorities require the assignee to clear any existing arrears. An Ombudsman's decision held that an agreement to clear arrears could be deemed to constitute an illegal premium, and enforceability of the agreement would be by no means certain.[2]

Liability for arrears accrued after assignment

Section 5 of the Landlord and Tenant (Covenants) Act 1995 removed the original tenant's liability for any future obligations of the tenancy in most cases. This includes rent that becomes due after the assignment.

In the case of tenancies arising on or after 1 January 1996, only the assignee can be held liable for rent due after assignment unless there is a prohibition against assignment, the landlord's consent should have been obtained and was not, or the original tenant agreed to act as a guarantor of the new assignee.

Where the tenancy was created prior to 1 January 1996 (or in one of the other cases mentioned above), the landlord can take action for arrears against either the assignee or the assignor. However, if the landlord wishes to take action against the assignor, s/he must notify the assignor of the arrears on a prescribed form within six months of the arrears falling due.[3] The assignor will be able to sue the assignee if s/he has to pay the rent arrears, as there is an implied term in all deeds of assignment that indemnifies the assignor.[4]

[1] s.17 Landlord and Tenant (Covenants) Act 1995.

[2] Ombudsman Investigation 90/B/1668, 5 December 1995, Wellingborough BC.

[3] s.17 Landlord and Tenant (Covenants) Act 1995.

[4] s.77 and Parts 7, 8, and 9 of Sch.2 Law of Property Act 1925.

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