Assignment of a Lease in Kenya: Consent, Liability and Release

A tenant who no longer needs premises may want another person to take over the lease. The transaction is commonly called an assignment. It can be useful where a business is sold, premises are no longer required or a tenant wants to realise value in an unexpired term. It is not simply a change of name on rent receipts. An assignment transfers the tenant’s leasehold interest to an assignee, subject to the lease, the landlord’s rights and any consent or registration requirements. If those steps are overlooked, the outgoing tenant may remain exposed and the incoming tenant may not receive the interest expected.

The starting point is the lease itself. It should be read before a price is agreed. The parties need to know the unexpired term, permitted use, rent and service charges, repair obligations, assignment restrictions, any requirement for landlord or superior-landlord consent, and whether the lease is registered. An assignment cannot give the incoming tenant a better interest than the outgoing tenant holds. It carries the existing burdens as well as the remaining opportunity.

Assignment is different from subletting

An assignment transfers the entire remaining interest of the tenant in the lease to another person. The assignee steps into the tenant’s position for the residue of the term, subject to the lease and applicable law. A sublease, by contrast, creates a new lease out of the tenant’s interest while the original tenant retains the head lease. The distinction affects who remains directly liable to the landlord, who receives rent and what interest the incoming occupier receives.

The parties should not assume that the label on their agreement decides the result. The term granted, the interest retained and the lease wording matter. A purported assignment that leaves the original tenant with a meaningful reversion may have a different legal effect from the one the parties expect. Where a business sale includes occupation of premises, the property documents should be considered separately from the sale of stock, goodwill and equipment. Completing the business sale does not itself transfer the lease.

Consent may be a condition of the transaction

Many leases restrict assignment or require the landlord’s written consent. A superior lease, charge, estate rules or other instrument may introduce a further consent requirement. The outgoing tenant should make the request early and provide the information the lease or landlord reasonably requires about the proposed assignee, intended use and ability to meet the obligations. The proposed assignee should not take possession, spend heavily on fit-out or promise a completion date before knowing whether consent is required and likely to be available.

The assignment agreement should make consent a clear condition where it is needed. It should say who applies, what documents and information must be supplied, what standard of consent is required, how long the parties will wait and what happens to any deposit or premium if consent is refused. An informal email or an assurance from an agent is not a safe substitute for the written consent required by the lease. The executed consent should be retained with the assignment and any registry documents.

Consent is not the only due-diligence point. The incoming tenant should review rent, service-charge and insurance positions; notices of breach; repair obligations; deposit arrangements; use restrictions; alterations; pending works; and any subtenant or occupier. A low assignment premium may conceal arrears, a dilapidations issue or a condition that makes the premises unsuitable for the new business.

The landlord, outgoing tenant and assignee should also agree how information will be handled during the consent process. Financial information or business plans may be requested to assess the proposed assignee, but the request should be tied to the lease and handled through the authorised representatives. The outgoing tenant remains responsible for meeting the current lease obligations until the transfer takes effect, so a delayed consent should not be treated as permission to stop paying rent or to leave the premises unmanaged.

Completion should transfer documents, possession and risk together

A well-managed assignment has a clear completion bundle. Depending on the transaction, it may include the original lease, signed assignment, required consents, rent and service-charge statements, evidence of payment, insurance information, keys, access devices, condition records, alteration approvals and any guarantee or covenant required by the landlord. The parties should agree the effective date, who accounts for rent and other outgoings up to that date, and when the assignee obtains possession.

If the lease must be registered, the registration route should be built into the timetable. The parties should confirm the correct instrument, execution requirements, supporting evidence, fees and whether a chargee or other person must consent. A signed assignment does not always have the same practical effect as completed registration. A buyer of a business or financier should not assume that physical handover alone proves that the assignee has acquired the intended leasehold interest.

Condition at handover deserves particular attention. Photographs, an inventory, meter readings and a list of landlord-owned fixtures can help distinguish pre-existing defects from later damage. The outgoing tenant and assignee may agree private adjustments between themselves, but those arrangements do not necessarily bind the landlord. The lease’s repair and reinstatement clauses should be read before either party treats handover as a clean break.

Assignment changes who carries the lease obligations

The key commercial question for an outgoing tenant is not whether the assignment has made every historic problem vanish, but precisely when the transfer takes effect and what had already accrued. Under section 46 of the Land Act, the rights and covenants in a lease continue to be enforceable by and against a transferee or assignee. The Act also releases a transferor or assignor from obligations as lessee after the transfer, except for obligations that accrued while that person was bound by the lease. The statutory effect is important, and a lease should be read alongside it rather than through a general assumption that the original tenant remains indefinitely responsible.

There is a practical qualification. An outgoing tenant who remains in occupation after the transfer continues to be liable for rent and covenants as if still the lessee for as long as that occupation continues. The handover date, vacant-possession arrangement and return of control should therefore be documented clearly. A separate guarantee, indemnity or covenant given as part of the transaction can also create its own obligation; it should be identified and assessed on its own terms, rather than confused with the obligations that travel under the lease.

The assignee should understand that taking the lease means taking its ongoing obligations. Rent, permitted use, repair, service charges, compliance and end-of-term duties do not begin from a blank page. The assignee should budget for the actual lease, not only for the premium paid to the outgoing tenant. If the landlord requires a guarantor or additional covenant, that requirement should be settled before completion rather than left to a later demand.

Past breaches require particular care. The assignment should identify known arrears, notices, repair claims or unauthorised alterations and say whether they are to be resolved by the outgoing tenant, assumed by the assignee or adjusted in the price. The Land Act preserves obligations that accrued while the outgoing tenant was bound, so disclosure and a realistic retention or price adjustment may be safer than discovering the issue after the keys have changed hands. Private arrangements between the tenants should be expressed clearly, but they do not alter the landlord’s statutory and contractual rights without the landlord’s agreement.

Make the assignment tell one consistent story

Before completion, compare the lease, landlord consent, assignment, business-sale documents, finance documents and handover record. They should identify the same premises, parties, effective date and permitted use. If an assignee is taking a lease to run a new activity, check that the use is allowed and that any planning, sector or estate approval is in place. If an outgoing tenant remains liable under a guarantee, price and document that risk honestly.

A lease assignment is safest when the commercial handover and legal transfer occur together. The incoming tenant then knows the interest and obligations being acquired, the landlord has the required consent and evidence, and the outgoing tenant knows whether any liability remains. That discipline is far more reliable than handing over keys and hoping the paperwork can be completed later.

Primary sources: Land Act, 2012, sections 45–46 and 63–69; Land Registration Act, 2012.