Can I assign my commercial lease to another business?

Whether you are selling your business or simply need to exit your premises early, “assigning” the lease is a common and effective strategy. However, you cannot simply hand over the keys; you must follow a legal process to get the landlord’s consent.

1. The New Rules (2023 Property Law Act)

Queensland law recently simplified the assignment process. To start, you must serve the landlord with a Proposal Notice. This notice must include:

• Details of the proposed new tenant (the “Assignee”).
• Evidence of their financial sanity and business experience.
• The terms of the proposed assignment.

2. The Decision Notice

Once served with your Proposal Notice, the landlord has one month to provide a Decision Notice.¹

• They can Consent (often with reasonable conditions, like the Assignee providing a bank guarantee).
• They can Refuse, but only if the refusal is reasonable.

3. What is “Unreasonable Refusal”?

A landlord generally cannot refuse an assignment just because they don’t like the new tenant. Reasonable grounds for refusal usually involve:

• The new tenant has a history of bankruptcy or bad credit.
• The new tenant intends to use the property for a purpose not permitted by the building’s zoning or the head lease.
• The new tenant has significantly less business experience than the current tenant.

4. Releases and Guarantees

One of the most important things for an outgoing tenant to negotiate is a Release.

• Without a formal release, you (and your personal guarantors) might still be liable if the new tenant stops paying rent six months later.
• In Retail Shop Leases, the law provides more protection: if you follow the disclosure rules correctly, you and your guarantors are automatically released upon assignment.²

Related Topics

• Commercial Lease Early Exit
• What is a Retail Shop Lease?
• Commercial Law Practice Area

Secure Your Exit

Assigning a lease is technically complex. We manage the “Proposal Notice” process and drafting of the “Deed of Assignment” to ensure that you are legally “off the hook” once you sell your business.

Planning to sell? Contact Bell & Senior to manage your lease assignment. Call (07) 5532 8777.