Due diligence—occupational lease alienation provisions—checklist


Published by a UUÂãÁÄÖ±²¥ Property expert
Checklists

Due diligence—occupational lease alienation provisions—checklist


Published by a UUÂãÁÄÖ±²¥ Property expert

Checklists
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On any due diligence exercise on the acquisition of a property for investment purposes, it is essential to consider the ability of the occupational tenants to assign, charge and underlet their respective premises. Any provisions that are too flexible may have an adverse impact on value as it may lead to covenant dilution. In an occupational lease with an open market rent review, any provisions that are too restrictive may have an adverse impact on value, as they may be considered onerous.

Assignment

Can the tenant assign?

Assignment may be:

  1. •

    prohibited

  2. •

    permitted without consent—this will be the case if the lease is silent; however, note that a covenant not to part with possession prohibits assignment, or

  3. •

    permitted with landlord’s consent—if assignment is permitted with landlord’s consent, the covenant is always subject to a proviso that consent is not to be unreasonably withheld (regardless of whether this is specifically imposed by the lease)

If assignment is prohibited and there is an open market rent review, consider whether the restrictive assignment provisions will be disregarded at review. If the

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