This article will discuss how to transfer a lease to another person.
When parties enter into a lease, the term of the lease is often a set term for a period of time. Some leases have a term of around three (3) years, and others have a term of more than twenty (20) years.
As time passes, tenants no longer require those leases. If an owner sells the business, the purchaser will normally take the lease with the business.
How Does Transferring Lease Work?
Each lease agreement has provisions stating whether a lessee can transfer the lease to a third party. This transaction is an ‘assignment of lease.’
Most leases require the consent of the Landlord before the there is a transfer of lease. Some leases require landlords not to unreasonably withhold consent. Others leave it up to the Landlord at its discretion to decide whether to transfer the lease.
Landlords, when considering whether to consent to the transfer of a lease, will consider the proposed new Tenant’s financial position to ensure that the new Tenant can meet the lease’s obligations without difficulties.
In a transfer of lease through an agreement called ‘Deed of Consent to Assignment of Lease,’ the law requires that both the current tenant and incoming tenant must sign the agreement, as well as the Landlord.
If either party is an incorporated company, the directors and/or director/secretary must sign in their capacity as a director and as a guarantor.
Complications of Transferring Lease
In a transfer of lease, the new Tenant inherits the whole of the lease, including any breach by the old Tenant. For instance, if the old Tenant has not been consistent with the payment of rent or has caused damage to the property, once a lease is transferred to the new Tenant, those obligations become the new Tenant’s obligations.
Protection of the New Tenant’s Legal Interest in the Lease
Although documentation of the transfer of the lease is essential, the new tenant must register the transfer of a lease with the New South Wales Land Registry Services Office in order to protect the interest of the new Tenant. Otherwise, the rights of the new Tenant under the lease may remain in jeopardy.
What if the Landlord Does not Consent?
If the agreement requires the landlord to consent or must not unreasonably withhold its consent (and does not do so), the Tenant can take the Landlord to a tribunal to force the Landlord to provide its consent.
- A transfer of lease must contain the consent of the Landlord;
- There must be documentation of the transfer by way of written agreement;
- The transfer must be registered with the New South Wales Land Registry Services Office;
- The new Tenant must be careful about its obligations under the lease, including any breaches by the old Tenant.
Do You Need Legal Help?
Lawyers can help in the transfer of a lease in several ways, including:
- Reviewing the lease agreement. Lawyers can review the lease agreement to ensure it contains all relevant terms and conditions, including the transfer provisions.
- Negotiating with the landlord. If the landlord is unwilling to approve the lease transfer, a lawyer can help you negotiate with them.
- Drafting the transfer documents. Once the landlord agrees to the transfer, a lawyer can draft the necessary documents.
- Resolving disputes. If there are any disputes between the landlord, tenant, and/or new tenant, a lawyer can help resolve them. They can represent you in court or mediation and help you reach a fair and amicable resolution.