Who Pays Commercial Lease Assignment Fees?

Transferring a commercial lease from one tenant to another is a common process for businesses looking to move, downsize, or sell. But one of the most frequent questions that arises during a commercial lease assignment is: Who pays the costs involved?

The answer isn't always straightforward. Costs can fall on both the outgoing tenant (assignor) and the incoming tenant (assignee), depending on the lease agreement, negotiations, and the landlord's position.

In lease assignments, the assignee pays the landlord's legal and administrative fees, while the assignor covers the cost of drafting the deed of assignment.

Below, we break down how fees are typically divided and what factors influence who pays.

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What Is a Commercial Lease Assignment?

A commercial lease assignment occurs when the current tenant (the assignor) transfers their lease obligations to a new tenant (the assignee). This process requires the landlord's formal consent, usually documented in a Licence to Assign.

As part of this process, there are various legal and administrative fees that need to be covered. Understanding who pays these fees can prevent disputes and ensure a smooth transfer.

Who Usually Pays Commercial Lease Assignment Fees?

In a commercial lease assignment, both the outgoing tenant (assignor) and the incoming tenant (assignee) usually share the costs, but in different ways.

In most cases, the incoming tenant (assignee) pays the landlord's legal fees and administrative costs for approving the assignment. The outgoing tenant (assignor) generally pays their own solicitor's fees and may also contribute to the Licence to Assign costs. However, the exact responsibility depends on the lease agreement and negotiations between the parties.

Factors That Influence Who Pays Commercial Lease Assignment Fees

When it comes to commercial lease assignment costs, there isn't always a fixed rule. Who pays what often depends on a few key factors:

1. The Lease Agreement

Most commercial leases clearly state who is responsible for assignment fees. Under UK law, including the Landlord and Tenant Act 1954 and the Cost of Leases Act 1958, each party is generally expected to pay their own legal costs unless the lease specifies otherwise.

2. The Landlord's Position

A landlord's approach can make a big difference. If they are keen to secure a financially strong or reliable incoming tenant, they may be more flexible and cover part of their own fees.

3. Negotiation Between the Parties

In practice, costs are often negotiable. For instance, an outgoing tenant who wants to exit the lease quickly may agree to pay a larger share, while a desirable incoming tenant might take on more costs to secure the property.

4. Authorised Guarantee Agreement (AGA)

If the outgoing tenant is required to remain as a guarantor under an Authorised Guarantee Agreement (AGA), this can affect how costs are divided, as it adds another layer of responsibility to the process.

What Costs Are Involved in a Commercial Lease Assignment?

A commercial lease assignment comes with several costs that both the outgoing tenant (assignor) and the incoming tenant (assignee) should be prepared for. These expenses can differ depending on the lease terms, the landlord, and the complexity of the transaction.

One of the main charges is the landlord's legal fees, which cover the review and approval of the Licence to Assign. On top of this, landlords often add administrative costs, which may include checks on the financial standing and references of the incoming tenant to ensure they are a suitable replacement.

The assignor, the outgoing tenant, will usually need to budget for their own solicitor's fees to manage the assignment process. In many cases, VAT is also payable, which can increase the overall cost.

The key expenses usually include:

• Landlord's legal fees for reviewing and approving the Licence to Assign.
• Landlord's administrative fees often include credit checks and reference checks for the new tenant.
• Assignor's solicitor fees for handling the assignment.
• VAT, where applicable.

It's worth noting that these fees can vary significantly. A straightforward lease assignment with a cooperative landlord may keep costs relatively low, while more complex arrangements, especially where an Authorised Guarantee Agreement (AGA) is involved, can lead to higher expenses.

This is why seeking advice from a commercial property solicitor is recommended to get a clear breakdown of likely costs before committing.

Do Landlords Pay Any of the Lease Assignment Costs?

Typically, landlords pass their legal and administrative costs on to either the assignor or the assignee. While it is rare for landlords to cover their own fees, some may do so if they are keen to secure a financially strong tenant. This is why checking the lease terms and negotiating responsibilities with the landlord is important.

Can the Assignor and Assignee Negotiate Who Pays the Fees?

Yes, the division of commercial lease assignment fees is often open to negotiation. For example, if the assignor is eager to exit the lease quickly, they may agree to pay a larger share of the landlord's costs. Likewise, an assignee may agree to cover more fees if the property is in high demand. Negotiating ensures a fair split of expenses between both parties.

Can the Lease Agreement Specify Who Pays Assignment Fees?

Yes, many commercial lease agreements clearly set out who is responsible for assignment costs. If the lease is silent on this point, UK law generally assumes each party pays their own fees. However, landlords often require the assignee to cover their legal costs as a condition of granting consent. Always review the lease carefully before proceeding.

Why Should I Use a Commercial Property Solicitor for a Lease Assignment?

A commercial property solicitor plays a key role in ensuring the assignment process runs smoothly. They review the lease agreement to clarify who pays the commercial lease assignment fees, negotiate fair terms, and protect your interests in the Licence to Assign. Without legal advice, tenants risk unexpected costs or unfavourable terms.

Whether you are an assignor or an assignee, getting advice from an experienced commercial lease solicitor is key. A solicitor can:

• Review the lease agreement to clarify cost responsibilities.
• Negotiate terms to ensure a fair split of fees.
• Protect your interests during the Licence to Assign process.

This ensures you understand your obligations, avoid unexpected costs, and complete the transfer smoothly.

Final Thoughts

So, who pays commercial lease assignment fees?

• The assignee (incoming tenant) usually covers the landlord's legal and administrative fees.
• The assignor (outgoing tenant) typically pays for their own legal fees and may share responsibility for the Licence to Assign.

However, every case is different. The lease terms, landlord's approach, and negotiation between parties all play a role in determining the final cost structure.

Before committing, always check your lease carefully and seek professional legal advice to ensure you know exactly what you'll be paying.

Unsure Who Should Pay the Lease Assignment Fees?

Our team can review your lease and guide you through the process with confidence. We'll handle the legal process, explain your cost responsibilities, and protect your interests every step of the way.

Don't let unexpected costs catch you out. Call our commercial lease solicitors on 0203 959 7755 to get professional advice before assigning or taking over a commercial lease.