Outsourcing arrangements – the “virtual assignment” survives

The Court of Appeal has upheld an appeal in the case of Clarence House Ltd v National Westminster Bank plc. This was the case in which the tenant had entered into a "virtual assignment" of its lease whereby all of the economic benefits and burdens of the lease had been transferred to a third party, without any actual assignment or change in the occupancy of the premises. The High Court had determined that the outsourcing agreement was an unlawful parting with possession of the property, as the virtual assignee had been assigned the right to deal with the property as if the tenant. However, in a comprehensive analysis of what amounts to “possession” at law, and what therefore amounts to a parting with possession, the Court of Appeal has overturned the decision of the lower court and saved many an outsourcing arrangement. Full analysis of this case will appear in the CPI Update.