If the developer has taken a lease of the project site, the lease will usually allow the developer opportunities to exit the lease. One way is to use the alienation (in this case, assignation/assignment) provisions contained in the lease.

The alienation provisions should allow the tenant to assign (transfer) its interest in the lease to a third party. The ideal position for a developer is to provide in the lease that landlord’s consent to an assignation or assignment is not required. In contrast, the landlord will prefer to have its consent required as this gives him an element of control over who is using the land.

The usual compromise is that, although the landlord’s consent is required, that consent will not be unreasonably withheld or delayed by the landlord where the third party is capable of complying with the tenant’s obligations under the lease. Frequently assignations within the tenant’s group of companies will be permitted without consent. The agreement reached regarding terms such as these is likely of course to depend on the respective bargaining powers of the parties to the lease.

In the next blog, Nicola will cover break options which are another way in which the developer and, in some cases, the landowner, can exit the lease.

Alix Bearhop