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Charges when Selling or Buying Leasehold Property

When you buy, own or sell a Leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations will be to make certain payments to the person or the organisation responsible for administering and managing your building. That person might be a landlord, a management company, or a managing agent instructed by the landlord or management company (referred to below as "the landlord"). The typed of payments or charges can be divided into three groups. They are:

Ground Rent

Your lease may provide for you to make regular payments of ground rent as well as service charges. Although the lease may initially oblige you to pay a fixed amount of ground rent, it may also contain a clause which allows the landlord to increase the rent in years to come. When buying a leasehold property you should always ask your conveyancer to explain if there are any rent review clauses in your lease and explain what this would mean to you in financial terms.

Service Charge

Service charges normally vary according to the amount that is spent by the landlord each year on the upkeep of the building as a whole, including for example, cleaning the communal areas, gardening, maintaining and renewing the structure of the building (including the roof), building insurance. Usually, the lease will oblige you to pay a fixed percentage or a "reasonable proportion" of that amount. You should ask your conveyancer how the service charge is calculated, what it covers and whether the landlord has any plans for expensive remedial works to be carried out to the building for which you will be responsible.

Administration Charges

The landlord is likely to make an administration charge if you ask for a service connected with the buying or selling of a leasehold property. The following are examples of these charges you may have to pay,

When you are selling

1. Sellers leasehold pack: When you are selling a leasehold property it will be your responsibility to pay the landlord's charge to provide a Sellers leasehold pack (usually in the form of a Form LPE1) to provide the leasehold information required by your buyer and their lender.

2. Licence to Assign: It is possible that your lease requires you to obtain a licence from the landlord to sell the property. This involves the landlord approving the buyer as a new owner of the property. You may have to pay both the landlord's and landlord's solicitors charges for consenting to the sale and providing the Licence.

3. Exit or Transfer Fee: A retirement flat lease may include an "exit" or "transfer fee" payable by you from the sale proceeds and expressed as a percentage of the property value.

When you are buying

1. Deed of Covenant: Some leases require a buyer to enter into a Deed with the landlord to confirm that you will be bound by the terms of the lease. The buyer has to pay this charge.

2. Notice of Assignment of Transfer and Charge: The landlord will require that a notice is sent to them notifying of the change of ownership and any mortgage lender. This is to ensure that the landlord has your contact details (these may be different from the address of the property you have purchased) for the purpose of sending you ground rent and service charge invoices, and details of works to be carried out to the building.

3. Certificate of Compliance: The landlord may be required to provide this to confirm to the Land Registry that the change of ownership requirements in the lease have been complied with.

4. Share or Membership Transfer Charge: If you are required to become a member of the Management Company then the landlord may make a charge to transfer the share or membership certificate into your name.

To ensure that you are aware of the above charges and procedures, when you are selling or buying leasehold property, you should ask your conveyancer to review the lease and property title at an early stage.

Hughes Paddison has an experienced residential property team who are able to advise on all aspects of leasehold conveyancing whether you are selling or buying. Please contact our residential property team, we will spend time discussing any queries you have concerning the leasehold property you are buying or selling, and provide you with a conveyancing quote.

The information contained on this page has been prepared for the purpose of this blog/article only. The content should not be regarded at any time as a substitute for taking legal advice.

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Charge tenants a fee for processing their assignment & sublease requests, if tenants don’t have to pay fees, they’re more apt to flood you with requests..

In these uncertain times, tenants are increasingly reluctant to lock themselves into long-term leases. Assignment and sublease rights may alleviate these concerns and give tenants added flexibility. However, they can also be a burden for landlords. For one thing, processing assignment and sublease requests takes significant time and administrative effort. It seems only reasonable that landlords should seek to pass along at least some of their processing costs to tenants.

That’s why you should include a lease clause that requires tenants to pay a non-refundable fee for each assignment or sublease they request. While the amount of the fee is subject to negotiation, it should be high enough to both cover your administrative and legal expenses and discourage tenants from making frivolous or superfluous requests that they know you won’t approve. We’ll give you a Model Lease Clause: Require Non-Refundable Fee to Process Assignment or Sublease Requests, that you can adapt and use in your leases.

Fee Compensates Landlord’s Actual Costs

During lease negotiations, tenants may object to these fees. Remind them of the extensive materials you must review when deciding whether to give consent to an assignment or sublease request. You need to evaluate the proposed assignee/sublessee’s financial records, credit history, business model, and reputation. Then you have to consider all of the different improvements the new tenant will need, which may involve detailed consultations with architects, electricians, plumbers, and other contractors and vendors. If the candidate is still viable at this point, you’ll have to talk to your attorney and review the assignment and sublease documents to identify what in the current lease you need to change to ensure proper legal protection. Then you have to negotiate and finalize those lease changes with all the parties involved.

There’s really no way to avoid these costs and hassles. Commercial leases typically give landlords the right not to consent to assignments or subleases but also spell out that such consent must not be unreasonably withheld. Carrying out due diligence is part of what landlords must do to demonstrate that they acted reasonably in denying consent. It’s basically a landlord’s cost of doing business.

Processing Fee Motivates Tenants to Pre-Screen

The non-refundable fee not only compensates you for your expenses but also incentivizes the tenant to pre-screen its prospective assignees or sublessee’s before presenting them to you. Tenants won’t want to lay out the fee if they know the prospect has little chance of winning the landlord’s acceptance. The fee thus spreads the risks and gives tenants a financial interest in the outcome of the vetting process.

By contrast, if tenants don’t have to pay fees, they’re more apt to flood you with assignment and sublease requests. Some ill-faithed tenants might even exploit this advantage as a harassment tactic, submitting dozens of requests in the hope that you’ll eventually feel like you have to accept one of the proposed assignees or sublessees just to put the stream of requests to an end.

How to Draft Non-Refundable Processing Fee Clause

Having established justification for charging the fee, you need to ensure you incorporate the appropriate language into your lease. Like our Model Lease Clause, your clause should make it clear that the fee is:

• Compensation for your administrative, legal, and other costs in processing assignment and sublease requests;
• Non-refundable, meaning the tenant must pay it regardless of the ultimate decision you make on the request;
• Payable for each assignment or sublease request the tenant makes and that you need not process the request if the tenant doesn’t make the accompanying payment [Clause, par. a].

Potential Compromises

If a tenant with significant negotiating leverage flatly refuses to accept the fees clause, you don’t have to ditch the idea completely. Compromises you can propose include:

Reduced fee: First, explore the possibility of reducing the fee amount. The key is to hold the line on a certain amount that you determine is the minimum necessary to fairly cover your costs and disincentivize frivolous requests from the tenant.

Partial refund: An alternative approach is to maintain the fee amount but agree to make a stated portion of the fee—such as 25 percent—refundable if you end up giving your consent to the particular assignment or sublease request. However, specify that you will pay the refund only after the effective date of the assignment or sublease, provided that the assignee or sublessee actually opens for business [Clause, par. c]. Better yet, postpone payment of the refund until after the assignee or sublessee pays three full months of rent. By that time, you should be satisfied that the assignee or sublessee is desirable and responsible.

See The Model Tools For This Article

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Factoring , Newsletters

THE NOTICE OF ASSIGNMENT: A REFRESHER COURSE

Allen J. Heffner Nov 20, 2023

The Notice of Assignment is probably the single most important document for a Factor. Understanding what needs to be included in the Notice of Assignment, how to send it, and who to send it to can mean the difference between getting paid and not. Despite the fact that every Factor is (or should be) familiar with legal requirements relating to Notices of Assignment, we still find that many of our factoring clients who end up in litigation make basic mistakes relating to their Notices of Assignment. The article focuses on what information needs to be included in the Notice, who the Notice should be sent to, and how the Notice should be delivered.

What needs to be included in the Notice of Assignment?

To be effective, there is certain information that must be included in the Notice of Assignment. The Uniform Commercial Code (“UCC”) requires that the notice must:

• Notify the Account Debtor that the amount due or to become due has been assigned;
• Notify the Account Debtor that payment is to be made to the Factor;
• Reasonably identify the rights assigned; and
• Be signed by the Factor or its client.

The Notice of Assignment should also include a remittance address so the Account Debtor is informed how and in what manner the Factor should be paid.

Additionally, while not explicitly required under the current version of the UCC, Factors should include language in their Notice of Assignment that: (i) the Client has assigned all of its present and future accounts receivable to Factor; (ii) the Factor holds a first priority security interest in all of the client’s accounts receivable; and (iii) all payments owing to the client must be paid to the Factor.

Who should the Notice of Assignment be sent to?

Notices of Assignment should not be sent directly to individuals with an Account Debtor. Sending the Notice to a specific individual may lead to issues relating to the authority of that individual to receive documents on behalf of the Account Debtor. Moreover, Factors that direct Notices of Assignment directly to individuals open themselves up to arguments that the Notices of Assignment was not properly delivered. For instance, our clients that have sent Notices of Assignment to individuals have ended up in situations where the individual to whom the Notice of Assignment was addressed no longer worked with the Account Debtor or the individual was located at a different office and the Notice of Assignment was not sent to the proper location. To be safe and to avoid unnecessary issues, Factors should send the Notice of Assignment to the Account Debtor’s accounts payable department.

Additionally, some states have specialized definitions for what constitutes “notice” on behalf of a company. If there is any question as to where a Notice of Assignment should be sent, Factors should check with their attorney to determine where these should be sent.

How should the Notice of Assignment be delivered?

The crucial issue for the enforceability of a Notice of Assignment is proof of receipt by the Account Debtor, not proof of delivery. Therefore, it is good business practice to send the Notice of Assignment either certified mail or other method that provides for proof of delivery.

Many of our clients have asked about whether it is proper to deliver the Notice of Assignment via e-mail asking the Account Debtor to confirm receipt or with “read receipts” turned on. Some Factors prefer this method because it is more cost efficient.

While sending Notices of Assignment via e-mail is enforceable, we would not recommend it as a general business practice. Sending the Notice in this manner requires delivering the Notice to a specific individual, which we have discussed above can be problematic. Sometimes officers and directors of companies have assistants or other personnel manage their e-mail accounts, raising the possibility that the individual to whom the Notice was sent, never saw the e-mail, even though the e-mail was “read.”

Last, there is no requirement that the Notice be signed by the Account Debtor and returned to the Factor. Often, we see our client’s Notice include a “confirmation of receipt” line for the Account Debtor to sign and return. Sometimes, the Factor will have proof of delivery to the Account Debtor but the Notice was not signed and returned by the Account Debtor. This adds unnecessary ambiguity as to whether the Notice was actually received by the Account Debtor. Therefore, we instruct our clients not to include such requests for proof of receipt.

Who should send the Notice of Assignment?

Some of our clients that have had bad experiences with Account Debtors after delivering a Notice of Assignment have chosen to have their Client be the one to deliver the Notice of Assignment. There is no legal requirement as to whether the Factor or the Client is the correct party to deliver the Notice of Assignment. However, we recommend the Factor be the one to deliver the Notice of Assignment. This way, the Factor is in complete control of the contents of the Notice of Assignment, how it is delivered, and receives confirmation of its delivery. We have been in situations in which the Factor allowed the Client to deliver the Notice of Assignment, but the Client did not deliver the Notice of Assignment in accordance with the law, leading to avoidable litigation.

Should a Factor respond to an Account Debtors questions regarding a Notice of Assignment?

Absolutely, yes. If requested by an Account Debtor, pursuant to the UCC, a Factor must furnish reasonable proof of the assignment for the Notice of Assignment to be valid. Too often we see situations in which requests are made or questions are posed by Account Debtors that the Factor ignores, thinking that because the Account Debtor received the Notice of Assignment, nothing else needs to be done. The Factor should respond to the Account Debtor and provide reasonable proof of the assignment. These communications can also provide invaluable insight as to the relationship between the client and the Account Debtor, how and when payments will be made, and can provide the Account Debtor a sense of trust with the Factor.

A Notice of Assignment is crucial for Factors because it provides legal protection, establishes priority of interest, prevents confusion, facilitates legal recourse, and enables effective communication with Account Debtors. Without this notice, Factors may encounter difficulties in asserting their rights and collecting payments from Account Debtors, potentially jeopardizing the financial transaction.

Bruce Loren and Allen Heffner of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. For over 25 years, Mr. Loren has focused his practice on construction law and factoring law.  Mr. Loren has achieved the title of “Certified in Construction Law” by the Florida Bar. The Firm represents factoring companies in a wide range of industries, including construction, regarding all aspects of litigation and dispute resolution. Mr. Loren and Mr. Heffner can be reached at [email protected] or [email protected] or 561-615-5701

Bruce E. Loren · Michael I. Kean · Allen J. Heffner · Kyle W. Ohlenschlaeger · Frank Sardinha, III · Lucia E. DeFilippo

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Assignment and Consent Standards in Commercial Leases

Mar 6, 2020

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. This article presents a brief overview of the assignment provision in commercial leases, both office and retail.

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. When a tenant’s interest in a lease is assigned, the tenant is transferring its entire leasehold interest and 100% of the leased premises to a third party for the entire remaining term of the lease. For the tenant, the assignment provision represents a potential exit strategy, dependent of course on the local market, and increased flexibility for future needs. For the landlord, the assignment offers greater security for its revenue stream and hopefully the avoidance of a tenant bankruptcy or default while keeping its building occupied. The tenant’s desire for flexibility and the landlord’s need for control is where the negotiations are focused. This article presents a brief overview of the assignment provision in commercial leases, both office and retail, with particular attention on the laws of Maryland, Virginia and the District of Columbia. The landlord’s standard for providing consent to a request to an assignment will be reviewed, and we will conclude by offering suggested language.

What If The Lease Does Not Contain An Assignment Provision?

The law traditionally favors the free alienation of property. Therefore, under the laws of almost every state, if the lease is silent on whether the landlord’s consent to an assignment is required, then the commercial tenant has the right to assign its interest. This is true in Maryland, Virginia and the District of Columbia. Given this baseline, almost every lease form will have a detailed provision setting forth the assignment process. Note also, however, that in most states it is also enforceable for a commercial lease to have an outright prohibition against assignments. Such a provision would likely be a non-starting deal point for most sophisticated tenants.

What Does Reasonable Mean?

If a lease simply provides that the tenant requires landlord’s consent to an assignment, but does not include the standard for giving or withholding that consent, then in many states the implied standard is that the landlord’s consent may not be unreasonably withheld. Historically this was the minority view, with the historical rule allowing the landlord to withhold consent for any reason. The implied duty of reasonableness is now more the norm as more states adopt this position when presented with the issue. There is express case law establishing this rule in Maryland, and most courts in Virginia and Washington, DC will imply such a covenant of good faith and fair dealing. Most states, though, do allow a landlord the sole right to grant or withhold its consent if the lease clearly expressly provides, and in Maryland the lease must specifically state that the landlord’s consent may be granted or withheld in the sole and absolute subjective discretion of the landlord. Again though, a sophisticated tenant with any leverage should never agree to such a provision.

Most negotiated leases will instead contain a provision requiring that landlord’s consent to an assignment is required, but such consent will not be unreasonably withheld. The tenant will likely also try to include landlord’s obligation to not unreasonably delay or condition its consent. A short clause without further defining what constitutes “reasonableness” generally favors the tenant, and landlords typically prefer including specific standards as to the criteria it can consider when reasonably deciding whether or not to consent to an assignment. Without such specificity, defining “reasonable” is difficult as the landlord and tenant clearly will have differing viewpoints and it may be left as a factual question to be decided in litigation. The typical definition (set forth in the Restatement (Second) of Property) would be that of a reasonably prudent person in the landlord’s position exercising reasonable commercial responsibility.

Absent a detailed provision listing the criteria a landlord can consider when reasonably reviewing a request to assign, a landlord is typically found to be considered reasonable if it considers certain general broad factors. First, the landlord reviews the assignee’s proposed use. In a retail setting, the landlord will be concerned whether the proposed use fits with the existing center and/or violates any existing exclusives or insurance requirements. In an office setting, the landlord might review the expected traffic and wear and tear on the building. Second, the landlord will consider the creditworthiness of the assignee. The landlord (and the assignor) will want to be confident that the assignee is capable of performing tenant’s obligations under the lease and a large creditworthy tenant increases the value of the asset. The assignor might argue that a strict financial test (such as a minimum net worth, for example) is unfair since the assignor is likely not being released upon the assignment and the landlord can still pursue the assignor in the event of a default. Third, the landlord will review the experience and history of the assignor. As mentioned above, landlords instead prefer a detailed list setting forth the many factors that they can include as part of reasonably reviewing a request for a lease assignment.

Without further establishing the criteria, the landlord puts itself at risk of a challenge by the tenant that a denial of a consent is unreasonable.

In defining “reasonable,” courts typically do not allow a landlord to deny or condition consent to an assignment based purely on economic reasons where the landlord results in substantially increasing what it was entitled to under the lease. In Washington, DC, there is well established case law holding that it is unreasonable for a landlord to withhold consent solely to extract an economic concession or improve its economic position. For example, a court would not consider it reasonable for a landlord to condition its consent on the assignee paying a greatly increased rent. Instead, as discussed below, landlords should look to protect their interests in a market of increasing rents by providing for either the sharing of excess rentals or a right to recapture.

What Are Typical Provisions In an Assignment Clause?

As discussed above, tenants generally prefer a short assignment provision simply requiring the landlord to not unreasonably withhold, condition or delay its consent to an assignment. But most leases are drafted by landlords, and over the years the assignment provisions have evolved to contain many typical provisions in addition to further defining “reasonableness,” including the following below.

• Sharing of Excess Rents. Since many states do not permit a landlord to condition its consent on improving its economic position (e. g. , by increasing the rent), most leases instead contain a provision where the landlord is entitled to all or a portion of the profits. The profits may mean increased rent, or it may even be construed more broadly to consider the value of the location in a sale of the tenant’s business. The landlord’s argument is that it doesn’t want the tenants competing in the real estate market. The tenant should push back here, and certainly try to lower the percentage shared, carve out any consideration received in the sale of tenant’s business, and only share profits after all of the tenant’s reasonable costs incurred in connection with the assignment were first deducted.
• Corporate Transfers. Since a purchase of the entity constituting tenant is likely not deemed an assignment under the law, most leases make clear that any such corporate sale, including the sale of either a controlling interest in the stock or substantially all of the assets of the tenant, is deemed an assignment for purposes of the lease. The tenant should carve out permitted transfers for typical mergers and acquisitions under certain conditions, and also carve out routine transfers of stock (or other ownership interests) between existing partners or for estate planning purposes. The landlord will likely accept a permitted transfer concept provided they receive adequate notice and the successor entity succeeds to all of the assets of the original tenant with an acceptable net worth.
• Assignment Review Fee. Most landlords include in their form lease the requirement that the tenant reimburse them for legal and administrative expenses incurred in reviewing the request for consent and preparing the assignment. The tenant clearly wants to keep these fees reasonable and in keeping with the local market.
• Recapture Rights. Landlords like to include the express right to recapture the premises in the event the tenant comes to it to request a consent for an assignment. A recapture clause allows the landlord to terminate the lease if market rents have increased or if it needs the space for another use. Sophisticated tenants should push back here as much as leverage allows, try to limit the time periods, and if nothing else try for the right to nullify the recapture by rescinding its request for the consent.
• Tenant’s Remedy. To protect themselves from claims for damages from the tenant if the landlord withholds its consent to a requested assignment, landlords often include a provision where the tenant waives its rights to monetary damages in such a situation and can only seek injunctive relief. The tenant should try to delete this provision, or at least, if leverage permits, provide for the right to seek damages if the landlord is subsequently found to have acted in bad faith.

Assignment provisions are heavily negotiated and both the commercial landlord and tenant need to be advised to the applicable local law and know the market for a comparable transaction. ( Note: The author represents office and retail landlords and tenants throughout Virginia, Maryland and the District of Columbia.) Sample reasonableness provisions for both office and retail uses are copied below for reference.

Retail Lease

Landlord and Tenant agree, by way of example and without limitation, that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (i) In Landlord’s reasonable business judgment, the proposed assignee lacks sufficient business experience to operate a business of the type permitted under this Lease and to a quality required under this Lease; (ii) The present net worth of the proposed assignee is lower than that of Tenant’s as of either the date of the proposed assignment or the date of this Lease; (iii) The proposed assignment would require alterations to the Premises affecting the Building’s systems or structure; (iv) The proposed assignment would require modification to the terms of this Lease, or would breach any covenant of Landlord in any other lease, insurance policy, financing agreement or other agreement relating to the Shopping Center, including, without limitation, covenants respecting radius, location, use and/or exclusivity; (v) The proposed assignment would conflict with the primary use of any existing tenant in the Shopping Center or any recorded instrument to which the Shopping Center is bound; and/or (vi) The proposed assignment or subletting would result in a reduction in the Rent collected by Landlord during any portion of the term of this Lease.

Office Lease

Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building; (ii) The Transferee intends to use the Premises for purposes which are not permitted under this Lease; (iii) The Transferee is a governmental agency; (iv) The Transfer occurs prior to the first anniversary of the Lease Commencement Date; (v) The Transferee has a net worth of less than $10,000,000.00; (vi) The proposed Transfer would cause a violation or trigger a termination right of another lease for space in the Building; or (vii) Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, or (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice.

Reprinted with permission from the March edition of the Commercial Leasing Law & Strategy© 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected] .

• John G. Kelly

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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Florida’s “Assignment of Benefits” Bill: A Guide Through the New Statutory Framework

Florida H.B. 7065 , expected to take effect July 1, 2019, makes several key statutory changes designed to curb AOB practices. We discuss a few of those highlights here.

The bill establishes several new sections of the Florida Statutes, including Fla. Stat. § 627.7152. § 627.7152(2)(a) sets requirements for a proper assignment of benefits:

627.7152 Assignment agreements.—

(2)(a) An assignment agreement must:

1) Be in writing and executed by and between the assignor and the assignee.

2) Contain a provision that allows the assignor to rescind the assignment agreement without a penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within 14 days after the execution of the agreement, at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.

3) Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier. . . .

4) Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee. . . .

Under § 627.7152(2)(a), contractors will no longer be able to blindside their customers and insurers with exorbitant bills with the expectation that an insurance company will eventually pay it. Now, contractors will be required to provide detailed estimates in advance of performing the work in order to effectively obtain an assignment of insurance benefits. Further, the assignee must promptly notify the insurer of the assignment. Insurers will now be able to monitor costs as they are incurred and ensure contractors are not performing unnecessary repairs.

In the event of litigation, § 627.7152(3) addresses the burden of the assignee:

(3) In a claim arising under an assignment agreement, an assignee has the burden to demonstrate that the insurer is not prejudiced by the assignee’s failure to:

(a) Maintain records of all services provided under the assignment agreement.

(b) Cooperate with the insurer in the claim investigation.

(c) Provide the insurer with requested records and documents related to the services provided, and permit the insurer to make copies of such records and documents.

(d) Deliver a copy of the executed assignment agreement to the insurer within 3 business days after executing the assignment agreement or work has begun, whichever is earlier.

Like a policyholder, assignees must cooperate with the insurer. If an assignee fails to maintain records, provide the insurer requested documents, or deliver the agreement as required by § 627.7152(2)(a), the assignee will bear the burden in litigation of demonstrating a lack of prejudice to the insurer.

In order to even get into a courtroom, however, § 627.7152(9)(a) requires assignees to serve written notice at least 10 business days prior to filing suit. The notice must include, among other things, the amount of damages in dispute, the amount claimed, and a pre-suit settlement demand. The assignee must also provide a detailed written invoice or estimate of services, the number of labor hours, and in the case of work performed, proof that the work has been performed in accordance with “accepted industry standards.” Upon receipt of the notice,

(b) An insurer must respond in writing to the notice within 10 business days after receiving the notice specified in paragraph (a) by making a presuit settlement offer or requiring the assignee to participate in appraisal or other method of alternative dispute resolution under the policy. An insurer must have a procedure for the prompt investigation, review, and evaluation of the dispute stated in the notice and must investigate each claim contained in the notice in accordance with the Florida Insurance Code.

Insurers have an opportunity to avoid litigation through negotiation or appraisal. Assignees are encouraged to make reasonable settlement demands and to consider reasonable offers because failure to do so can trigger an award of attorney’s fees in the insurer’s favor:

(10) Notwithstanding any other provision of law, in a suit related to an assignment agreement for post-loss claims arising under a residential or commercial property insurance policy, attorney fees and costs may be recovered by an assignee only under s. 57.105 and this subsection.

 (a) If the difference between the judgment obtained by the assignee and the presuit settlement offer is:

1) Less than 25 percent of the disputed amount, the insurer is entitled to an award of reasonable attorney fees.

2) At least 25 percent but less than 50 percent of the disputed amount, no party is entitled to an award of attorney fees.

3) At least 50 percent of the disputed amount, the assignee is entitled to an award of reasonable attorney fees.

Fla. Stat. § 627.428 is the one way attorney’s fee shifting statute in Florida’s insurance code.  This statute generously provides fee-shifting to “prevailing” policyholders and claimants, including following negotiated settlements in contravention of the general American rule. Under the new AOB statute, § 627.7152(10), awards of attorney’s fees are discretionary in suits against insurers by assignees.  Further, § 627.7152(10) requires assignees to obtain a judgment of an amount at least 50% greater than the insurer’s pre-suit settlement offer in order to obtain an award of attorney’s fees. For additional encouragement to accept reasonable settlement offers, assignees who fail to obtain a judgment at least 25% greater may be required to pay the insurer’s attorney’s fees.

Last, insurers can avoid “assignment of benefits” issues altogether by prohibiting AOBs in their policies. The bill creates a new § 627.7153, which allows “[a]n insurer may make available a policy that restricts in whole or in part an insured’s right to execute an assignment agreement” if certain conditions are met.  Those conditions include that the insurer must also provide unrestricted coverage, the restricted policy is available at a lower cost than the unrestricted policy, policies prohibiting assignment in whole cost less than policies prohibiting assignment in part, and restricted policies must contain notice on its face.

With the passage of this new law, Florida will see a new litigation landscape in the area of assignment of benefits. The law is prospective only, so it will not technically impact existing AOB litigation.  However, through passage of this law, Florida has disincentivized unscrupulous contractors and leveled the courtroom playing field and the presently rampant AOB litigation should begin to fade. Ultimately, these changes are expected to benefit Florida policyholders with reduced insurance premiums.

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Issue a notice of assignment or charge on your leasehold property

Transactions such as sales and remortgages require a notice of assignment, or transfer, and/​or charge being served to us. Your lease says we must be told about this.

Costs for this service

• Notice of assignment - £35
• Notice of charge - £35
• Notice of assignment and notice of charge - £70

What you need to know...

Notice of assignment (transfer).

When a lease is sold or passed to someone else it’s known as an assignment to the new owner or owners. The lease says that the council must be told about this.

If you've recently sold your property it is the responsibility of the buyer's solicitor to send us a notice of transfer and pay the fee so that we can update our records. The notice should be issued by the seller's solicitor within one month.

Notice of charge

This is a notice confirming that a mortgage has been secured as a charge against the land registry. This notice should be served alongside the notice of transfer if you are registering a purchase.

You'll also need to issue a notice of charge if you:

• buy a property with a mortgage
• add someone to your mortgage
• remortgage the property (get a new mortgage, or borrow more money on your existing mortgage).

Do it online

Pay for a notice of assignment

Pay for a notice of charge

Pay for a notice of assignment and charge

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Who is to give the post-completion notice of assignment to a landlord, and pay the registration fee: assignor or assignee of the lease?

Practical law resource id 7-523-3944  (approx. 3 pages), get full access to this document with a free trial.

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