Assignment of a Commercial Lease: What Business Owners Need to Know

Introduction

Business circumstances can change — you might sell your business, relocate, or restructure your operations. If you no longer need your leased premises, one possible solution is to assign your commercial lease to another tenant.

However, lease assignments come with strict legal requirements and hidden risks. If handled incorrectly, you could remain liable for the new tenant’s actions long after you’ve left the premises. In this article, we explain what lease assignment means, how it works, and the key things every business owner should know before proceeding.

What Is a Lease Assignment?

An assignment of lease is when the existing tenant (the assignor) transfers all their rights and obligations under the lease to another party (the assignee).

Essentially, the assignee steps into your shoes and takes over your lease. The landlord’s consent is usually required before the assignment can take effect.

Example: You lease a warehouse. After selling your business, the buyer wants to continue operating from the same premises. Rather than signing a brand-new lease, you assign your existing lease to the buyer with the landlord’s consent.

When Assignment Might Be Needed

Common scenarios include:

• Selling your business and transferring the lease to the buyer.

• Restructuring your company (e.g., moving operations to a new entity).

• Relocating to another location and needing to exit early.

Assignment allows continuity for the incoming tenant, but it also transfers your ongoing obligations — which can be risky without proper release wording.

Landlord Consent: The Legal Requirement

Most commercial leases prohibit assignment without the landlord’s written consent. This clause is designed to protect the landlord’s financial interests by ensuring the new tenant is suitable.

Legally a landlord must not unreasonably withhold consent to an assignment. However, “reasonable” grounds to refuse consent may include:

• The proposed assignee has poor financial history or insufficient resources.

• The assignee’s intended use of the premises breaches planning rules or lease terms.

• The assignor is in breach of the lease (e.g., rent arrears).

Before granting consent, landlords often require:

• A formal written request

• Financial and business information about the assignee

• A signed Deed of Assignment

• Payment of the landlord’s legal and administrative costs

The Assignment Process

• Review the Lease Terms - Confirm what conditions must be satisfied for assignment (notice periods, required documentation, landlord approval process).

• Obtain Landlord Consent - Submit a written request with all required details about the new tenant.

• Prepare a Deed of Assignment - This legal document transfers rights and obligations from you (assignor) to the new tenant (assignee). All three parties — landlord, assignor, and assignee — typically sign it.

• Complete Disclosure (if applicable) - In the case of a retail shop lease, the Retail Shop Leases Act 1994 (Qld) imposes specific disclosure obligations for assignments. Other States and Territories may have similar disclosure obligations.

• Handover and Finalisation - Once consent is granted and documents executed, the assignee takes over rent payments and ongoing obligations from the agreed assignment date.

Continuing Liability After Assignment

One of the biggest traps for outgoing tenants is assuming they are automatically released from liability after assignment.

Unless your landlord signs a formal release (often within the Deed of Assignment), you may remain secondarily liable for:

• Unpaid rent or outgoings

• Breach of make good obligations

• Damage to premises

This means if the assignee defaults, the landlord can pursue you for the unpaid rent — even if you haven’t occupied the property for years.

Assignments Under the Retail Shop Leases Act

If your lease is a retail shop lease, the Retail Shop Leases Act 1994 (Qld) and retail shop leasing legislation in other States and Territories - provide additional protections. For example:

• The landlord must not unreasonably withhold consent.

• The assignor must provide disclosure statements to both the landlord and assignee.

• Once all disclosure requirements are met, the assignor may be released from future liability under certain conditions.

However, these protections don’t apply to standard commercial (non-retail) leases.

Why You Should Get Legal Advice

An assignment of lease is a complex transaction involving three parties and strict legal procedures.

Greyson Legal regularly advises clients on lease assignments. We assist by:

• Reviewing lease terms and advising on consent requirements

• Preparing or reviewing Deeds of Assignment

• Negotiating releases and managing disclosure obligations

• Liaising with landlords and their solicitors to ensure compliance

Conclusion

Assigning a commercial lease can be an effective way to transfer your business operations — but it must be done carefully. Without proper legal advice and a formal release, you could remain tied to the lease for years after you’ve moved out.

Need help assigning your commercial lease?

Greyson Legal provides practical, cost-effective leasing advice for tenants and landlords.

📞 Call 0411 248 885 | 📧 Email mail@greysonlegal.com