It is usually the case that when parties enter into a commercial lease, the intention is for the lease to run its course from the commencement date to the expiry date. But what happens when a party wants to get out of the lease early due to a change in circumstance? Below we will canvass the usual ways a lease may come to end before the expiry date.

Assigning the Commercial Lease

Before entering into the sale of business contract, you should inform the lessor in writing of the proposed sale and provide the lessor with the information required as stated in your lease under the assignment provision. State-based retail legislation governs a retail lease and the lessor is not able to unreasonably withhold consent if you provide for the lessor’s consideration, the paper works concerning the new tenant’s financial standing and business experience. You must also give the incoming tenant a copy of the disclosure statement that you received at the time you entered into your lease or request the lessor provide you with an updated disclosure statement that you, in turn, can provide to the assignee/incoming tenant.

Surrendering the Commercial Lease

If you are purchasing a business, you must ensure that the term of the lease for the premises is long enough for you to carry on the business. It may be worthwhile when seeking the lessor’s consent to the assignment of a lease to request to extend the lease’s term of the lease. Although the lessor is not obliged to change the lease condition or duration, it is worth a try! With an assignment of lease, you are taking on the lease agreement on an ‘as is’ basis with little or no scope for any changes to the documents. So, you would hope that the current tenant/business owner has already done all the hard work of negotiation for you!

Breach and Abandonment

In Victoria and New South Wales, the lessor must deal expeditiously with a request for an assignment. This means that the lessor is deemed to have consented if the lessor has not given written consent or withheld consent within 28 days of being requested to do so. In QLD, there is no timeframe for the lessor’s consent.

A lessor may withhold consent to an assignment if the assignee proposes to change the use of the shop, or the financial resources or retailing skills of the proposed new tenant is inferior to that of the assignor/existing tenant.

Key Takeaways

Assigning a lease is a formal process that goes in hand with selling or purchasing a business and often both transactions are done at the same to ensure a seamless changeover for both parties. If you would like assistance with an assignment of lease or get advice before entering into a sale or purchase transaction, get in touch with our experienced leasing and sale of business team on 1300 544 755.

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