Commercial Property Assignment vs Sub Lease liability

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    Commercial Property Assignment vs Sub Lease liability

    Hi All,

    I own a barber shop in England along with a business partner. We ended up with it as a it was my BP's brother's, but he left the country and left his dad (guarantor) with the lease and a closed shop. We agreed to take it on and make something of it, just prior to Covid coming.

    It's been open on and off due to Covid, roughly break even/profitable while open, but with having to close intermittently largely killed any gains. Now our barbers have quit for other ventures and we have no time or inclination to hire again as we have very busy full time careers.

    We wanted to find someone to take over the lease (as there is no clause), discussed it with the agency/landlord who owns the space and they said sure, provided they pass a credit check that's fine. We simply planned to offer it up to someone to take over the lease and we'd include all the contents free of charge. We are not bothered about losing our initial investment, just wanted a clean break so to speak were happy to provide a fully functioning shop for that.

    I've only just found out today about the existence of an AGA. According to what've read, we're essentially still liable if the new tenant misses rent and for the state of the shop should they mess it up and refuse to rectify/pay. Our contract states we will have an AGA for every assignment. I've also read that something called a 'hold over' exists, where our liability could be extended beyond the initial lease period if the newly assigned tenant chooses to extend.

    My fear is that the newly assigned tenant could potentially take over the lease, miss a bunch of payments, sell all of the contents we included in the deal and leave us essentially screwed. In this case, would it be better to agree a sub-lease where we maintain more control and state that any unwanted content is stored/given to us to sell etc. Are there any other options? It's a large commercial property agent that owns it, so very little chance of them allowing us to not sign an AGA etc.

    We just want some way to get out of this lease/reduce our costs as much as possible, so any advice or options are appreciated.

    The landlord might agree a surrender if there is an acceptable new tenant prepared to take a new lease. Contrary to what might be supposed, the demand for well positioned secondary retail is quite good.


      How long does the lease have to run?


        About 26 months.


          For the same reasons you give, some multiple retailers have a policy of never assigning and only sub-letting.

          Whether an AGA is really of any benefit to a landlord depends upon whether the outgoing tenant can be traced and/or has any assets should the need arise. The procedure for enforcing an AGA is not straightforward: there is a time limit on how far back the s17 notice can be served; also whether the landlord would want to pursue the claim. Under the 1995 Act, a tenant has the right to take over the residue of the lease so if your assignee were to default it might at the time be worth taking back the lease and assigning it or sub-letting to someone else.

          "Our contract states we will have an AGA for every assignment." That would be unusual. Normally, the outgoing tenant ("A") enters into an AGA for the duration of the assignee's interest (("B"). If and when B assigns to "C", assignor A's interest ends and B becomes the assignor to C; and so on.


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