Real Estate Tip of the Week: Assignment to Overseas Companies? - 14th April 2014
Published 14 April 2014
It is not unusual for standard commercial leases to incorporate a clause which allows the Landlord to refuse an assignment where the proposed assignee (or one of its guarantors) is domiciled, or incorporated in a jurisdiction where a judgment of the courts of England and Wales will not be enforced without consideration of the merits of the case.
Whilst this may, on the face of it, appear a sensible precaution against the potential cost of having to effectively pay for two enforcement claims in two different jurisdictions, the devil is, as ever, in the detail.
Any companies incorporated in Japan, China or the US would be excluded from assignment by this restriction, meaning that tenants could be prohibited from assigning their lease to many well-known global brands, which may in turn lead to arguments about the marketability of the leasehold interest at rent review.
So before incorporating such a clause in a lease, it is worth considering whether a carve-out for companies incorporated in specific countries may be worthwhile, the benefits of assignment to global brands and wider assessment at rent review may outweigh the potential costs of enforcement.