Landlord consent, leases and premises in a distressed sale
The single most common deal-killer in a UK administration sale. Landlord consent doesn't transfer with the assets. Here's how buyers structure occupation, negotiate assignment, and price dilapidations before completion.
Leases need express landlord consent under s.19(1A) LTA 1988.
Short-term licence to occupy while consent negotiates. No security of tenure.
Assignment = you inherit the accrued dilapidations. Survey pre-offer.
Landlord negotiation levers
Landlords hold cards. The counter-levers:
- Cash rent deposit (typically 3–6 months' rent).
- Bounded personal guarantee (2 years or £X cap).
- Covenant strength pack: 2 years accounts, bank references, business plan.
- Rent uplift acceptance (3–8% is normal ask).
- Dilapidations cap negotiated into the assignment deed.
Related
Frequently asked questions
Does a lease transfer automatically on an asset sale?
No. A commercial lease requires landlord consent to assign, under s.19(1A) Landlord and Tenant Act 1988. The administrator has no power to force assignment. If the lease has a change-of-control clause on the tenant company, that's already been triggered by the appointment.
What is a licence to occupy?
A short-term contractual permission from the administrator to occupy while landlord consent is negotiated. Not a lease — no LTA 1954 protection, no security of tenure. Rent paid to the administrator, usually monthly, no notice period beyond what the licence states.
How long does landlord consent take?
s.1 Landlord and Tenant Act 1988 requires consent 'within a reasonable time' — case law suggests 4–8 weeks is defensible. Landlords use this window to negotiate rent uplift, personal guarantee from the buyer, or dilapidations settlement.
What is the LTA 1954 s.24 protection?
Business tenants inside 'the security of tenure' regime have an automatic right to renew at market rent. If your target lease is inside 1954 Act protection, you inherit that renewal right — but only if you become the tenant. Assignment gets you in; a licence does not.
Can the landlord forfeit before I complete?
Yes, if there's arrears or breach. Administrators can defend forfeiture proceedings under s.146 Law of Property Act 1925 (relief from forfeiture) but only up to a point. Rent arrears typical of pre-administration companies can trigger CRAR — always check with the landlord's agent before completion.
What about dilapidations?
Dilapidations liability crystallises on lease-end. If you take an assignment, you take the accumulated dilaps. Pre-completion dilaps survey (Terminal Schedule) is essential — expect £40–150 per sqft on tired industrial units, up to £250 on offices. Negotiate a lease-end cap in the assignment.
What is CRAR?
Commercial Rent Arrears Recovery under Tribunals, Courts and Enforcement Act 2007. The landlord can instruct enforcement agents to remove goods for rent arrears without a court order after 7 days' notice. If you're operating on a licence with rent outstanding, CRAR is a live threat.
Does business rates transfer with the lease?
Business rates attach to the ratepayer (occupier), not the lease. On completion you register with the local billing authority. Empty rates apply if you don't occupy within 3 months — factor this into the completion window.
Can the landlord refuse consent?
Only reasonably (s.1 LTA 1988). Refusal that damages the sale can attract a damages claim, but litigation takes 6–12 months. Practical answer: offer a rent deposit, personal guarantee (bounded), and a covenant strength pack (accounts, references).
What if the premises are freehold?
Then it transfers with the assets on a normal Land Registry transfer (TR1). No consent needed. Charges against the freehold need release from the secured creditor — the administrator handles this pre-completion, but check the Land Registry Title before offer.