Presentation Date: 20 June 2018
Most, if not all, commercial leases contemplate that the tenant may seek to assign, sublease, or otherwise part with possession of the leased premises.
As a general rule, the tenant is permitted to assign their leasehold interest, provided that they obtain the prior consent of the landlord, or otherwise satisfy the criteria prescribed in the lease instrument.1 Difficulties may arise, however, where the tenant has complied with all of the stipulated conditions and the landlord’s consent is refused.
Even if the assignment is allowed to proceed, further complications may emerge if the incoming tenant (the assignee) fails to comply with their obligations under the lease. Is the original tenant (who has assigned their leasehold interest) responsible for a subsequent breach of the lease by the new tenant?
Throughout this paper, I have sought to examine some of the practical considerations – as well as potential pitfalls – surrounding the assignment of commercial leases (including both retail and non-retail shop leases). Whilst focusing primarily on the Queensland jurisdiction, I will also allude to the current legal position in other states and territories, most notably, Victoria and New South Wales.
This paper will be divided into 4 broad headings:
- Part A: The Concept of “Assignment” – a brief introduction to the concept of assignment as distinct from other dealings, such as subleases;
- Part B: Preconditions to Assignments – in which we will examine some common preconditions to assignments of lease (including the customary requirement for the tenant to obtain the landlord’s consent before entering into an assignment or other proposed dealing with the tenant’s leasehold interest). We will also canvass the options available to the tenant if (having sought the landlord’s consent in the prescribed manner) the landlord still says “no”;
- Part C: An Incentive to Assign: The Assignment of Incentive Deeds – in which we consider whether an incentive (a benefit offered by the landlord to induce the tenant to enter into a lease) may be assigned to an incoming tenant; and
- Part D: The Post-Assignment Position of the Parties – an examination of the rights, duties and obligations which pass with the assignment.
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