If you have a leasehold interest of a property interest, you’ll come across what is known as an ‘alienation’ clause.
It sounds strange, almost as if something is being separated and alienated.
In a simple sense, that’s what it will do – allow a current tenant and lease owner to transfer it to another party. Therefore, they alienate themselves from the obligations of this tenancy.
The Basics of the Lease Alienation Clause
We’ll get down to the nitty-gritty about these soon, or you can jump down to the Frequently Asked Questions below to find the exact answer you’re after.
But let’s first understand the basics.
Firstly, you don’t always have or need such an alienation clause; the lease can be silent on alienation matters.
So one example is a standard short-term AST lease for a residential flat or house.
However, in reality, they exist in some form because, without them, it technically means that the tenant could transfer the lease as a legal ‘common law’ principle to anyone else.
Secondly, once you locate the alienation clause in the tenancy, you need to appreciate how this restricts options to transfer the lease.
Some things may be permitted, whereas others may be prohibited.
Different lengths and types of leases will differ, of course. So long leasehold interests of residential properties will automatically allow in some situations and need correct information about rather than permission for.
However, commercial property leases tend to have set conditions and circumstances where the landlord needs to consent to such alienation.
And thirdly, you need to understand your options and how to go about this.
Two popular forms of alienation are assigning the lease interest and subletting another under the lease.
While the former transfers everything to another tenant, the latter keeps the existing tenant and lease in place, allowing another sublease to exist below it.
However, you can get other forms of alienation clauses in such leases, such as sharing occupation with a related party like a company and more informal concession agreements.
Getting Lease Alienation Right
Whatever situation you’re in, this is one of those areas of property management where you need professional help to ensure you get it correct.
So, whether interpreting a current lease or agreeing on terms for a new one; or if you’re a landlord looking to agree on this or a tenant requesting it. Everyone needs help.
While solicitors can advise on the legal side of things and what documentation you need to agree to an alienation of the lease interest, a good surveyor or property manager will provide more pragmatic advice on how to negotiate it with the other party for hopefully a win-win situation.
If you need any more help, contact us, and we’ll see what we can assist with.
Frequently Asked Questions
Here are some of the main queries you encounter when looking to alienate a lease interest.
What does alienation in a lease mean?
As mentioned earlier, alienation means you’re trying to alienate yourself from a particular lease and pass it over to another person.
Often this is a current tenant who no longer wants the property to occupy or have this lease interests in, so they look to dispose (or even sell for profit) to another person.
What is an alienation clause?
This is how this process of handing over the lease and occupation is documented in the tenancy (there may also be other legal documents such as Deeds of Variations and Licences).
It’s usually all together in one section in the middle of the lease, with lots of details about the circumstances allowing such alienation and the conditions of doing it.
What is the proper protocol and procedure for alienating a lease?
The lease will be the primary way this process is adhered to, right down to how and when notices and information are first issued to how it is finally documented and registered with the Land Registry.
However, you can have property law implying things as well, such as the landlord needs to act reasonably is granting permission for lease alienation through the Landlord and Tenant Act 1988.
Also, there can be good-practice guides and helps such as The Alienation Protocol.
What does an AGA lease mean?
This is an Authorised Guarantee Agreement. It is a specific way commercial property leases can still keep an existing tenant on the hook to guarantee things even if it is successfully assigned and alienated to another tenant.
It’s a separate legal document and, although very popular, may not always be necessary.
What if a lease is silent on alienation?
If this is the case, then theoretically, you can look to transfer things, which is why there is often a specific clause saying a tenant can’t automatically alienate if this is what a landlord intends.
In reality, though, double-check that there’s not something referred to in the lease. And if you do think it’s all okay, it’s probably worth running past the other party anyway to make sure there are no queries.
What is the effect of an alienation covenant in a commercial lease?
This means there is a sure way a tenant of a lease can hand over their lease obligations and occupation to another tenant or party.
Often this is by assigning and transferring the whole lease to someone else. However, there can be other versions that are still involved, such as allowing an additional underlease or shared occupation and concessions.
What is a qualified alienation covenant?
This means that the lease can be alienated but often down to the landlord giving consent.
Nowadays, this often obliges the landlord to be reasonable and sensible about granting this, rather than try and hold the tenant to ransom.