Assignment of a tenancy

Assignment is a way that a tenant can transfer their tenancy to another person.

On assignment, the assignor's legal interest in a property is passed to the assignee who takes over that interest and becomes the tenant. All the terms of the original tenancy agreement apply to both the new tenant and the landlord, including the amount of rent payable.

Where a tenant grants someone a tenancy and remains a tenant of the original landlord this won’t be an assignment. Instead a subtenancy is created, and the original tenant becomes the landlord of the new tenant.

Whether assignment is possible will depend on:

• the type of tenancy

• what the tenancy agreement says

• whether the landlord agrees

Under section 1(1) of the Law of Property Act 1925 all tenants, including those with a long lease, have a legal estate (an interest) in land. With this comes a general right to assign that estate to another person.

For many types of tenancy this general right is modified by statutory provisions that limit when and to whom the tenancy can be assigned. This will override the general right to assign.

Joint tenancies can be assigned but are still subject to the statutory rules for that type of tenancy.[1]

A tenancy agreement can also limit when and how a tenancy can be assigned. For example, by requiring the landlords consent.

Find out more about rights to assign for:

• secure, flexible and introductory tenancies

• assured and assured shorthold tenancies

• regulated tenancies

Licences are not a legal interest in land and cannot be assigned.

If the tenancy agreement says nothing about assignment then, subject to any statutory limitations, the tenant is free to assign.

In most cases, the tenancy agreement will only allow assignment if the landlord gives their consent (a qualified prohibition).

If the tenancy agreement states that assignment is not allowed (an absolute prohibition), the tenant can still assign but they will be in breach of the tenancy. 

Qualified prohibition

If the tenancy agreement contains a qualified prohibition stating that the tenant may not assign without the landlord's consent, then the landlord cannot ‘unreasonably withhold’ consent.[2] This is an implied term of the agreement.

Whether consent has been unreasonably withheld will depend on the facts of the case.[3]

The courts have previously held that:

• the purpose of a term in a tenancy agreement prohibiting assignment without the landlord's consent is to protect landlords from having their premises occupied in an undesirable way or by an undesirable assignee. The landlord cannot refuse consent on grounds that have nothing to do with the relationship of landlord and tenant, but can refuse if the potential assignee is not, for example, financially sound[4]

• it may be reasonable for a landlord to refuse consent because of the purpose for which the assignee intends to use the premises, even if that purpose is not forbidden by the original tenancy agreement[5]

• although landlords need only usually consider their own interests, there may be cases where there is such a disproportion between the detriment to the landlord and the detriment to the assigning tenant that it would be unreasonable for the landlord to refuse consent.[6] An example of this might be where the property is very difficult to assign and the tenants would have great difficulty in finding another potential assignee, whereas the landlord's loss in accepting the proposed tenant is minimal

The court has held that consent was not considered to be unreasonably withheld where the tenant had arrears.[7]

For tenancies granted after 1 January 1996, a landlord has the right, in certain circumstances, to require that the tenant wishing to assign should act as the guarantor of the new assignee where it is reasonable to do so.[8]

Discrimination

The Equality Act 2010 makes it unlawful for a landlord to refuse consent on the grounds of a protected characteristic (disability, gender reassignment, pregnancy or maternity, race, sex, sexual orientation, and religion or belief).[9]

A person who has the right to dispose of premises must not unlawfully discriminate against any person on the basis of any of the above protected characteristics by:[10]

• the terms on which they offer to dispose of the premises

• declining to dispose of the premises, or

• the way in which they treat a person seeking to move in to the premises

The right to dispose of premises includes the right to assign.[11]

Getting the landlords consent

If a tenancy is assigned without consent where the agreement requires it, this provide a ground for possession against the new tenant.

It is not possible to argue that the landlord could not have reasonably refused consent after the assignment has taken place.[12]

The Landlord and Tenant Act 1988 introduced a procedure that can be followed to obtain consent. It applies where the tenancy agreement contains a qualified prohibition against assignment. The Act only applies to applications for consent made after 29 September 1988. It does not apply to secure tenancies.

The tenant must serve a written application for consent to assign on the landlord, and the landlord must reply in writing within a reasonable time (the Act does not define what is a reasonable time), giving consent unless it is reasonable not to do so.

If consent is refused, the landlord must give the tenant reasons for the refusal.[13] If the landlord does not reply or withholds consent unreasonably, the tenant will be able to take a civil action for damages against the landlord for breach of this duty.[14] The onus of proof that any refusal of consent was reasonable is on the landlord.[15]

Tenants could also seek a declaration that the landlord is acting unreasonably where they do not want to take the risk of assigning without consent. Alternatively, the tenant could combine a claim for damages for breach of statutory duty with one for an injunction requiring the landlord to comply with their duty.

Assignment without consent or where prohibited

Where the tenancy agreement has an absolute or qualified prohibition against assignment and the tenant assigns the tenancy without the landlord's consent, the assignment will still be effective as long as it is by deed.[16]

However, the landlord may be able to bring possession proceedings against the new tenant.

In order for an assignment to be legal, it must be made by deed. A deed is a written document that has been signed and labelled as a deed and witnessed. This is necessary in order for the assignment to bind the landlord and any other party affected by the assignment but not part of the agreement to assign.

A deed is required even where the original tenancy was agreed orally.[17]

In one case, even though the tenant had undertaken in divorce proceedings to transfer the tenancy into his wife's name, the fact that there was no deed meant that an assignment was found not to have occurred. Nothing was done to transfer the tenancy into the wife's name, although she continued to live in the flat on her own and pay the rent. When she asked the managing agents to put the rent book in her name, they recovered possession of the property.[18]

The deed must give the name(s) and address of the original tenant(s) and the new tenant(s) (the address might be the same, depending on the situation). It must also give the details of the landlord. An independent person must witness the signatures of the original tenant(s) and the new tenant(s), but the same person can witness all the signatures.

The new tenants should keep the deed of assignment in to prove the assignment took place. It’s also a good idea for the outgoing tenant to have a copy in case of any disputes.

Equitable assignment

An attempt to assign a tenancy without satisfying all the formalities of a deed may still be effective as equitable assignment if the agreement to assign is evidenced in writing.[19] The equitable assignment will bind the parties who signed the written agreement and make them liable to damages for breach of contract as well as to orders for specific performance.

The new tenant is not liable for rent arrears that accrued before they took over the tenancy.[20]

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.

The original tenant 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.[21]

Arrears after assignment

For tenancies arising on or after 1 January 1996,[22] normally only the assignee can be held liable for rent due after the assignment.

The exception is where either:

• there is a prohibition against assignment and the landlord's consent should have been obtained and was not

• 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, they must notify the assignor of the arrears on a prescribed form within six months of the arrears falling due.[23] The assignor will be able to sue the assignee if they have to pay the rent arrears, as there is an implied term in all deeds of assignment that indemnifies the assignor.[24]