An assignment of a lease takes place when the tenant (assignor) transfers/sells to another person (assignee) their entire interest in the property for the unexpired residue of the lease. Section 52 (1) of the Law of Property Act 1925 requires that for the legal estate to pass to the assignee, then the assignment must be by Deed.Under the doctrine of “privity of contract”, the original tenant remains liable to perform all the covenants in a lease throughout the term. Thus, if the lease is assigned to a third party, in the event that the new tenant defaults, the original tenant remains liable for the covenants contained therein.In some cases therefore, if an assignee is found to be in breach of contract, the landlord is able to look to the assignor to seek redress; even though the original tenant has no control over the subsequent occupiers business.
The Landlord and Tenant (Covenants) Act 1995 sought to address this issue and relieve the original tenant from such liability upon assignment. Modern leases granted on or after 1st January 1996 usually incorporate this change in legislation.