A lease grants a tenant exclusive use to a premises for a period of time. Often circumstances change within that period of time and lead to the tenant seeking an assignment of the lease to a new party. This is often as a result of the sale of the tenant’s business.
Assignments of lease are not at all uncommon, however there are a few things to remember to ensure that they run smoothly and both parties comply with their obligations under the lease and the relevant legislation.
From a tenant’s perspective, it is important to be aware of what you are required to do under your lease when seeking the consent of your landlord to an assignment. The Leases (Commercial and Retail) Act 2001 states that, before requesting the landlord’s consent to an assignment of lease, a tenant must give any proposed new tenant a copy of the disclosure statement (if any) that was given to them in relation to the lease.
It shouldn’t be taken for granted that a landlord will consent to an assignment, here in the ACT the legislation allows a landlord to request particular information on a proposed new tenant and, if that information is not satisfactory to the landlord, they are able to refuse to provide consent. Further information that the landlord can request may include (but is not limited to):
- the financial position of the prospective tenant;
- information in respect of the tenant’s prospective ability to conduct the nominated business; and
- information about what the tenant intends to use the premises for.
Once the landlord obtains this further information they are able to make an informed decision and provide their consent, or not. However, it should be noted that a landlord is not able to unreasonably withhold consent. The refusal of consent can often cause dispute between the parties which may be drawn out and costly to both parties, so it is important to obtain the appropriate legal advice early on in the process.
From a landlord’s perspective, arguably the most important factor when dealing with assignments are the time frames stipulated under the Leases (Commercial and Retail) Act 2001. If a tenant requests an assignment of lease, the landlord must either consent or refuse within 28 days of receiving the request – or within 21 days of receiving further information or documents (the request for which must be made within 14 days of receiving the request for assignment). If a landlord does not comply with these strict timeframes they can be deemed to have consented to the assignment of lease.
In order to ensure compliance with the legislation and your obligations under a lease, we recommend that you contact our office as soon as an assignment of lease is considered. We can assist in managing the strict timeframes and help you achieve a smooth transaction, resulting in a positive outcome for all involved.