Assignment Of Lease

Definition

An assignment of lease occurs when a tenant assigns/transfers their lease to another party.

An assignment or transfer is essentially the same situation.

A tenant must seek approval from the landlord to transfer a lease.

Most common circumstances where this may occur;

  • Tenant sells business.
  • Tenant is unable to fulfil their obligations and seeks to find another party to take over their lease.
  • Change to company directors under the lease.

Process

A tenant is required to make a written application for approval to transfer their lease.

The new applicant is required to demonstrate to the landlord they have suitable business experience and financial capacity to comply with the obligations under the current lease.

Generally, we require an applicant to complete an application form and provide various evidence to support their position. References and position are then verified.

The Retail Leases Act also outlines specific provisions regarding a transfer of lease request including;

  • Assignor must provide an assignment disclosure statement to the assignee which must include details of any significant changes to the business/premises.
  • The tenant may ask the landlord for a current disclosure statement, the landlord must provide within 14 days of request.
  • The landlord must process an application for a transfer of lease within 28 days.

Can a request for an assignment of lease be refused?          

A landlord can withhold consent if

  • The proposed tenant seeks to change the use of the premises as stated under the lease.
  • Where the applicant does not have sufficient financial resources or business experience.
  • The applicant has not complied with the assignment provisions of the lease.
  • The assignor has not provided the assignee with relevant business records.

A tenant is unable to request a transfer of lease if they are in default of their obligations and where notice has been issued to the tenant.

Consideration

An assignment of lease is also an opportunity to vary the lease. Consideration should be given to extending the term if this is of interest to the parties.

In the event an applicant does not have adequate business experience it may be worth withholding consent, however offering conditional approval with increased security.

Expenses

All reasonable costs incurred by the landlord can be recovered from the tenant.

An agent can charge a fee to the landlord for processing an application for an assignment of lease, providing their authority contains the fee. The fee is recovered from the tenant.

Any reasonable legal fees incurred by the landlord for preparing an assignment of lease may also be recovered from the tenant.