Assignment of Commercial Lease in Queensland: Key Legal Considerations

Assignment of Commercial Lease in Queensland: Key Legal Considerations

An Assignment of a lease in Queensland is a process where a Tenant (assignor) transfers their rights and obligations under a lease to another party (assignee).

This most commonly occurs in instances where a Tenant is:

1. Selling their business and they lease a commercial property to operate the business; or
2. Needs to vacate the premises before the lease term ends.

Understanding the legal framework and requirements for lease assignments is crucial for both Assignors, Landlords and the proposed Assignees.

This article sets out the key aspects of transferring a commercial lease and the steps that should be followed.

What are the Key Steps and Legal Requirements of an Assignment of Lease?

1. Review the Lease

The lease will typically contain a clause regarding the requirements for an assignment. The current Tenant, known as the Assignor, must review the lease to understand if the lease can be assigned and if there is any relevant conditions or restrictions on the assignment.

Ordinarily the lease will state that the Assignor is required to obtain the Landlord consent to the assignment.

2. Seeking the Landlord’s Consent

If the lease requires Landlord consent, the Assignor must formally request this.

The Landlord cannot unreasonably withhold consent but may impose conditions, such as requiring the new Assignee to meet certain financial criteria and proving that they are suitable to take on the Lease. An example of the documents that can be requested by the Landlord are as follows:

1. Statutory Declaration of Assets and Liabilities of the proposed new Tenant and the proposed new Tenant’s Directors and Shareholders.
2. Statement of Past Business dealings of the proposed new Tenant.
3. Two (2) Character/Trade references of the proposed new Tenant.
4. A copy of the Business Contract (if applicable); and
5. Details of how the proposed new Tenant will finance the purchase of the business (if applicable).

The Landlords will also usually require confirmation that the Assignor will pay their legal fees.

3. Disclosure Statement:

For Retail Shop Leases under the Retail Shop Leases Act 1994, the Assignor must provide the proposed Assignee with a Disclosure Statement that includes key details about the lease and the premises and a copy of the Lease.

The Landlord must also provide a Disclosure Statement to the Assignee.

The Assignee is required to provide the Landlord with an Assignee Disclosure statement, as well as such information as the Landlord may reasonably require to be satisfied of the financial resources and retailing skills of the Assignee as outlined above.

4. Prepare a Deed of Assignment:

A Deed of Assignment is a legal document that is prepared for an Assignment of lease.

A Deed of Assignment formalises the transfer of the lease by confirming the Landlords consent to the assignment of Lease, binds the Assignee to the terms of the lease and releases the Assignor from the terms of the lease.

It should be drafted carefully, outlining the rights and obligations of all parties.

The Deed of Assignment then needs to be executed by all parties.

5. Tenant’s Obligations

Until the Deed of Assignment is executed and the Landlord has confirmed that their conditions of consent are satisfied, the Assignor remains responsible for fulfilling all lease obligations, including rent payments and property maintenance.

6. Assignee’s Responsibilities:

Once the Deed of Assignment is executed, and the Landlord has confirmed that their conditions of consent are satisfied, the Assignee assumes all rights and responsibilities under the existing lease terms.

It is also important to note that a transfer of lease is treated as a dutiable transfer of land and the Assignee should understand and their requirements to lodge a Form 1 Transfer with Titles Queensland.

Obtaining Advice

Assigning a Lease in Queensland involves several legal steps and careful consideration of the Lease terms. Both Tenants and Landlords should ensure they understand their rights and obligations throughout the process.

If you require advice or assistance with any leasing matters, please contact the experienced team at Miller Sockhill Lawyers on 07 5444 4750 today.

The content of this article is current at the date of publishing and is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Grace Barnes, Lawyer

12.06.2024

Registration of Commercial Leases    Commercial Lease – Making an Offer to Lease