Assigning your commercial lease - by JHK Legal in association with Ray White Commercial

Most lease agreements will contain a provision for both parties, whether be a tenant or a landlord to be able to assign their lease. 

Assignment of a lease can occur in different manners depending on whether you are a tenant or a landlord and depending upon the terms contained in your lease.  In the event that there are clauses contained within the lease that prohibit assignment then it may not be possible for the lease to be assigned. 

Often leases will contain terms allowing the tenant to assign a lease only where written consent of the landlord has been granted and usually the landlord will still require the assigning tenant to remain liable under the lease if breached by any future tenant whom the lease has been assigned. As a tenant, it is important to ensure a clause is inserted into the lease which highlights that a landlord won’t unreasonably withhold consent.

HOW TO OBTAIN CONSENT TO FROM YOUR LANDLORD TO ASSIGN YOUR LEASE

Before approaching a Landlord for consent to assign a lease, there is some standard information required that most Landlords will request regarding the proposed tenant including financial viability of the proposed tenant, ownership information if a company tenant is proposed, reasons for assignment and details of any other lease interests of the proposed tenant and type of business conducted by the proposed tenant.  

For retail shop leases there are minimum standards and requirements for the assignment process and usually if the process is followed tenants are to be granted consent for assignment. Tenants should be aware that there are two main grounds for when a landlord can refuse consent for assignment of a retail shop lease:

1. The proposed assignee intends to change how the shop is used; or

2. The proposed assignee has financial resources or retailing skills that are inferior to those of the current tenant

Tenants proposing to assign their lease obligations are usually still liable to the landlord for the duration of the lease in the event that the assignee breaches covenants of the assignment lease. 

It is also important for tenants to note that usually lease terms will require them to be in compliance with the terms of the lease prior to assignment. 

WHEN A LANDLORD MAY HAVE TO ASSIGN

Assignment for the Landlord, will predominantly occur in the course of the sale of the premises and/or sale of business located at the premises. This assignment is usually dealt with in the sale contract between the existing Landlord and the new Landlord. Usually a lease will provide automatic rights to a landlord for the assignment of a lease without the consent of the tenant. 

Our advice is that when entering into a lease, whether you are a tenant or landlord that you thoroughly review and obtain independent legal advice as to the provisions of your lease, including the important assignment provisions that may become relevant if you choose to sell the premises and/or your business.

If you are a tenant or a landlord that requires any advice in relation to the preparation of your lease and/or advice in relation to the assignment of your lease, do not hesitate to contact us at JHK Legal. 02 8239 9600 or visit JHKlegal.com.au 

Read full magazine here: https://joom.ag/bnUL


Ray White’s top 10 listings for December: (Click on address to view listing)

Level 3, 441 Kent Street Sydney

Suite 12.02, 25 Bligh Street Sydney

Part floor 23, 9 Castlereagh Street Sydney

Level 6, 9 Barrack Street Sydney

Part level 3, 22 Market Street Sydney

Part level 9, 46 Market Street Sydney

Level 4, 40 King Street Sydney

Level 2, 1 Barrack Street Sydney

Level 4, 86 Liverpool Street Sydney

Suite 8.03, 46 Market Street Sydney