You (or your company) are a tenant of commercial or retail premises. You are thinking of assigning your lease.
What are the main issues?
If you assign your lease, you transfer your rights under the lease to a new tenant. You cannot assign part of your lease. An assignment must deal with the whole of your premises.
A proposed assignment requires the consent of your landlord. Normally, the landlord cannot unreasonably withhold consent to an assignment, provided that the proposed new tenant is of sound financial standing and is willing to provide personal guarantees and/or a bank guarantee at least equivalent to any guarantees that you may have provided to your landlord.
With an assignment, the landlord will normally require you and the new tenant to enter into a deed with the landlord under which the new tenant agrees to take over your obligations under the lease, and you acknowledge that despite the assignment, you are not released from obligations under the lease.
Normally, if you assign a lease, the new tenant takes over your obligations under the lease from the date of the assignment, but you are not released from your obligations under the lease unless you are able to persuade your landlord to release you. Although releases are not normally provided, there is no reason why you should not request a release.
Although you remain liable after an assignment, landlords will normally release any personal guarantees or bank guarantees that may have been provided by you, provided that the new tenant offers equivalent replacement guarantees.
Transfer of shares instead of assignment
If your company is the tenant under your lease, there may be circumstances in which it suits you to sell the company rather than assign the lease. Some leases contain provisions which require the landlord’s consent for a transfer of all or a majority of shares in the tenant company, as if the transfer was an assignment of the lease. If your lease does not contain these provisions, the consent of the landlord will not be required. However, if personal guarantees have been provided, the landlord’s consent will be required if it is intended to replace those guarantees.
Retail Lease Act
If your lease is of retail premises covered by the Retail Leases Act, that Act sets out the procedure to be followed in relation to assignments and limits the circumstances in which your landlord can withhold consent to an assignment.
With an assignment, the landlord will expect its legal expenses in connection with the assignment to be reimbursed. You may be able to negotiate for the subtenant to pay all or some of the landlord’s legal expenses and your legal expenses.
Form: Assignment of Lease - Multiple Tenants
[Download this form as a .doc (Word) file]
Consent to Assignment of Lease
[Scenario: more than one tenant is on original lease, one of those tenants is moving out, one or more tenants are staying, a new tenant is moving in]
Tenant: __________________________ [current tenant that is moving out]
Assignee: ________________________ [new tenant that is moving in]
Landlord, Tenant, and Assignee agree as follows:
1. Location of Premises
Tenant has leased the premises located at _______________________________ from Landlord, pursuant to a Lease Agreement dated ___________, between [name(s) of current tenant(s) who will remain in apartment] and Tenant (collectively as co-tenants) and Landlord (the “Lease”).
2. Lease Beginning and Ending Dates
The lease was signed on __________________, and the initial 12-month term of the Lease expires on __________________.
Tenant hereby assigns all of his/her interest in the Lease to Assignee, beginning on ___________.
4. Tenant's Future Liability
Tenant's financial responsibilities under the terms of the lease are ended by this Assignment. Specifically, Tenant's responsibilities for future rent and future damage are ended.
5. Tenant's Right to Occupy Terminated
As of the date of this Assignment, Tenant permanently gives up the right to occupy the premises.
6. Binding Nature of Agreement
Assignee is bound by every term and condition in the Lease, including but not limited to the payment of rent. [Name of current tenant(s) staying in apartment] continue(s) to be bound by every term and condition in the Lease, including but not limited to the payment of rent.
7. Assignment of Security Deposit
Tenant assigns all of his/her interest in the security deposit to Assignee, and will have no right to request any portion of the security deposit from Landlord. Assignee has reimbursed Tenant for his/her share of the security deposit.
Landlord's signature Date
Tenant's signature Date
Assignee's signature Date