Hybrid working has changed the way occupiers think about space, with a shift towards how quickly space can be adapted as needs evolve.
Instead of there being a focus on how much space is needed, for landlords and tenants alike, portfolio value is now heavily influenced by how easily leases allow space to be resized, reconfigured, and reoccupied.
Alienation is central to that, as assignments, underlettings, sharing arrangements and group occupation can provide a route to flexibility, or act as a constraint, depending how the lease is structured. Leases that make these routes difficult to use can trap value, whereas leases that enable them to work well can release it.
Begin with a “flex‑readiness” audit – what do your leases actually allow?
Do not make the mistake of assuming your lease is “standard”, because hybrid working has exposed just how varied, outdated, and even operationally inconvenient many alienation clauses are.
A useful audit looks beyond whether a tenant is permitted to assign or underlet. Instead, it evaluates how quickly, cleanly, and commercially those rights can be exercised, as well as how much friction they introduce.
- The consent requirement (absolute vs qualified) - Even if consent cannot be unreasonably withheld, the conditions attached can be highly restrictive.
- Part‑underletting capability - Many older leases allow underletting of the whole but not part, with or without a landlord’s consent.
- Sharing and desk‑licensing rights - Modern occupiers often want to use managed workspace, hybrid operators, or flexible desk-sharing arrangements. If leases equate any form of sharing with unlawful underletting, buildings lose competitiveness against flexible offices.
- Operational mechanics - A consent clause can look permissive but quickly become dysfunctional for a number of reasons. These include the amount of information the tenant must supply, superior landlord or lender involvement, rigid longstops, and detailed pre‑completion requirements.
If these aren’t mapped clearly, a landlord can inadvertently breach their obligation to act within a “reasonable time”.
Hybrid working changes the “right” alienation outcomes (and your negotiating stance)
Hybrid working is actively driving occupational behaviour. This has reshaped alienation strategies in three distinct ways.
Many occupiers are retaining core premises whilst looking to deal with surplus space through subletting, avoiding the costly outlays and unnecessary use of resources associated with relocations. This makes the workability of part-underletting a direct input into value.
At the same time, decision making has accelerated because in volatile markets, slow consent kills deals. That’s why disciplined internal processes, standardised documentation, and clear response protocols have become essential to maintaining leasing velocity and complying with the statutory and contractual “reasonable time” requirements.
There has also been a noticeable increase in the use of sharing arrangements. When underletting is too slow or expensive, tenants are turning to options such as managed workspace, coworking and desk-licensing models, all of which offer a certain degree of flexibility that formal underletting doesn’t always provide.
If leases prohibit sharing or treat it as unlawful underletting, your asset becomes incompatible with contemporary occupancy strategies. In some cases, a carefully structured deed of variation allowing controlled sharing is often a cheaper and more operationally robust solution than repeated one‑off consents.
True assignment value lies in the AGA and guarantor structure
Assignments are often marketed as flexibility for tenants. For landlords, the decisive factor is centred more around risk, specifically how contingent liabilities are structured.
- AGAs as a Condition of Consent - Modern commercial lease structures assume the outgoing tenant will guarantee the assignee via an Authorised Guarantee Agreement (AGA) under the Landlord and Tenant Covenants Act 1995. This can often deter assignments, particularly when the outgoing tenant is restructuring or right‑sizing.
- “GAGA”-style extensions - Many landlord-drafted suites go further, often requiring (i) the assignee’s guarantor to guarantee the AGA, and/or (ii) the outgoing tenant’s guarantor to guarantee the AGA. This creates a multi-layered guarantee chain. While protective, it can make a lease unmarketable.
- Asset‑management strategy - In hybrid markets, forcing AGAs for strong covenants is counterproductive. Differentiating by covenant strength and commerciality can improve leasing velocity without undermining risk control. In general, it’s beneficial to consider rent deposits in place of AGAs/guarantees.
Pitfalls that most often destroy flexibility (and value)
These recurring issues undermining leasing agility almost always appear during diligence or transaction execution.
- Contracting‑out mistakes (1954 Act) - Incorrect notices or declarations can unintentionally grant security of tenure, which compromises investment strategy and obstructs strategic disposals.
- Completing before consent - Inconsistencies between agreed terms and final documents, or failure to satisfy pre‑completion conditions, can render transactions invalid and expose both parties to breach.
- Cost and timing shock - Tenants often underestimate things such as landlord legal costs and superior landlord fees, as well as lender approval, costs, and timings Almost as standard, all such costs (plus VAT) are placed on the tenant. Without transparent communications upfront, deals stall or collapse.
- Side letters and informal sharing - Informal arrangements, especially around sharing, desk licensing, or operational concessions, create hidden breaches. These frequently resurface during sale or refinancing diligence, leading to re‑trades or indemnity demands.
“Alienation optionality” is now part of your valuation story
Leases that enable fast, compliant assignment, underletting and sharing reduce void durations and strengthen income resilience, both of which represent key valuation levers in hybrid-working conditions. Lease flexibility is a core driver of portfolio performance, and that’s why it’s vital to take the time to understand and, where necessary, recalibrate your alienation provisions. Doing so can help to unlock trapped value and streamline your decision-making process, meaning you can ensure that your assets reman aligned with how your space is actually being used.
If you have any questions about anything we’ve covered in this article, or if you’d like to find out how our team can advise and support you and your business, please don’t hesitate to contact a member of our team.