How Can I Assign Or Transfer A Commercial Lease In Australia?

Business owners may opt to terminate an existing commercial lease for various reasons. Alternatively, when selling the business, the buyer may opt to continue the existing lease instead of signing a new one with the landlord.

In such cases, you’ll need to assign or transfer the commercial lease from you (the assignor) to the new tenant (assignee). You can assign/transfer a commercial lease in Australia by following our detailed guide.

The transfer process starts with getting consent from the landlord, getting the deed of assignment, and releasing the lease to the assignee. This article explains each step, including the process of transferring a commercial lease in Australia.

1. Review Your Current Lease

The first step is to review the terms and conditions of your current lease. Get help from a skilled commercial lease lawyer to review the lease and confirm whether it can be assigned or transferred to another party. Also, determine if you must meet any requirements or conditions for the landlord to accept the transfer or assignment of the lease.

The procedure for assigning or transferring a commercial lease is outlined in the Retail Leases Act 2003 in Victoria. Consult a commercial lawyer to know how the procedure works in your state/territory.

2. Request For Transfer Consent From The Landlord

For a commercial lease transfer to be successful, the landlord must accept it. You’ll need to communicate (in writing) with the agent or landlord to seek their consent for the transfer. Include the financial and business information of the new tenant.

The agent/landlord will use the information to determine if the proposed tenant is a perfect fit and will manage to continue with the lease.

Can A Landlord Withhold Consent For The Commercial Lease Transfer?

Yes. The landlord can withhold consent for the transfer of ownership for various reasons. These include:

  • The assignee intends to use the property in a manner not permitted in the current lease. For example, the new tenant wants to turn the premises from a car repair shop into a bookstore.
  • The new tenant has insufficient financial resources/business experience to fulfil the lease’s term.
  • The assignor failed to comply with the transfer provisions of the commercial lease.
  • The assignor failed to provide the assignee with business records for the last three years. This requirement applies when selling/transferring an ongoing business.

3. The Deed Of Assignment

After the landlord agrees to the lease transfer, the next step is preparing the deed of assignment. This document transfers the lease’s rights and obligations from the assignor to the proposed tenant.

The deed of consent contains details such as:

  • The landlord’s consent to assign/transfer the lease to the new tenant.
  • The assignor’s agreement to transfer the rights, interests, and obligations to the new tenant.
  • The set date of the lease transfer (called the assignment date).
  • The assignee’s agreement to take over the lease’s rights and obligations from the assignment date to the end of the lease.

4. Final Steps To Transfer A Commercial Lease

The final steps of transferring a commercial lease involve removing the outgoing tenant from the lease and accepting the new one. The deed of assignment relieves the assignor of the lease’s rights and obligations.

The tenant must fulfil all the set obligations before the transfer. Consequently, the landlord refunds any security the tenant had provided when entering the lease.

Next, the assignee reviews and accepts the new lease. The incoming tenant takes over the lease’s rights and obligations from the assignment date.

5. Pay Stamp Duty

After finalising the commercial lease transfer process, the final step involves paying any governmental fees for the transfer/assignment. Usually, you must pay stamp duty to your state/territory government when you transfer a commercial lease. The payable amount depends on the monetary value of the transaction and the state laws.

If the transfer/assignment doesn’t involve cash transactions, you might only be required to pay a nominal fee. Consult an experienced lawyer to determine any taxes/fees involved in a commercial lease transfer in your state or territory.

How To Transfer A Retail Lease

When assigning or transferring a retail lease, you (the tenant) must provide the assignee with an updated disclosure statement. The document should also contain any updates/changes the landlord made when you entered the lease.

A disclosure statement outlines the vital details the new tenant should know about the lease. The information includes:

  • The duration/term of the lease
  • The costs of the lease, including the annual rent and other outgoings
  • Any demolition/demolition clauses
  • Terms and conditions of the lease, including renewal options
  • Details of the leased premises

The tenant can request an updated disclosure statement (not older than three months) from the landlord. The landlord must provide the statement within a specified time frame (depending on the state/territory) to avoid legal consequences. For example, in Victoria, the landlord should provide the disclosure statement within 14 days after the request.

The state/territorial governments also impose various penalties if the landlord fails to provide the statement within the specified timeframe. In Victoria, the landlord might be liable to pay a fine not exceeding 10 penalty units.

Transfer A Commercial Lease The Right Way

Getting legal advice and following the proper procedure is essential if you’re assigning or transferring a commercial lease to another party. Mishandling the transfer can lead to the landlord rejecting it and unnecessary lease costs for your business.

Our experienced commercial lawyers help business owners with all legal matters and can advise you on your lease transfer. Request a free consultation or call 1300 234 886 today.  Whether in Sydney, Brisbane, or Gold Coast, we’re ready to assist you throughout the transfer process.

Resources & Further Reading

  1. https://www.austlii.edu.au/cgi-bin/viewdb/au/legis/vic/consol_act/rla2003135/
  2. https://www.vsbc.vic.gov.au/your-rights-and-responsibilities/accurate-lease-information/#:~:text=A%20disclosure%20statement%20is%20a,key%20elements%20of%20the%20lease.
  3. https://business.gov.au/finance/taxation/stamp-duty

Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Consult with a qualified commercial lawyer for personalised advice regarding your specific situation.