If you run a business from a rented shop, office, or warehouse, the lease can feel like it locks you in. But circumstances change. You might need to move to a bigger space, close down, or sell the business. In those situations, you don’t always have to break the lease. You can often transfer it to someone else through a process called lease assignment. Under the new Property Law Act 2023 in Australia, the rules around this have shifted, making it clearer that a landlord cannot unreasonably withhold consent. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Lease assignment is not the same as walking away. The original lease continues, but a new tenant steps into your shoes for the rest of the term. That means the new person takes on all the rent, the repair obligations, and the other conditions you agreed to. The landlord still has a tenant, and you get out from under the lease — provided you handle it correctly. The trick is that most leases require the landlord’s written permission first, and the process has several moving parts. If you are thinking about selling your business, the lease assignment is often a key part of that deal. You can read more about negotiating your commercial lease to understand how these clauses are set up from the start.
The central concept here is the assignment clause in your lease.
This clause is where everything starts. It tells you what information you need to provide, how long the landlord has to respond, and whether they can ask for a guarantee from the new tenant’s directors. My first move would always be to pull out the lease and read that clause carefully before doing anything else.
What changes when you get lease assignment wrong
Getting the assignment process wrong can leave you on the hook for rent long after you have left the premises. Under Australian retail leasing laws, a landlord cannot unreasonably refuse consent, but they can still say no if the proposed assignee is not financially capable. If you let the new tenant move in without written consent, you risk a dispute and potential liability for any breaches that occur later.
The Property Law Act 2023 introduced more structured notice requirements and time limits for landlords to respond. If a landlord does not reply within the statutory timeframe, they may be deemed to have consented. That is a significant shift. It means delays now have legal consequences for the landlord, not just for you. But it also means you need to document everything. If you send a request and hear nothing back, you cannot assume silence equals consent without checking the specific timeframes in the Act and your lease.
Another common misunderstanding is thinking you are free once the assignment is signed. That is not always true. Many leases require a deed of guarantee from the outgoing tenant, meaning you stay liable if the new tenant defaults. This is a real-world complication that catches business owners off guard. If you are selling a business and assigning the lease as part of the sale, you need to know whether you are walking away clean or still carrying risk. For complex situations, getting a second opinion from a service like JustAnswer Business Law can help clarify your obligations before you sign anything.
Common mistakes in lease assignment and how to avoid them
Proceeding without written landlord consent
This is the most frequent error. You find a new tenant, agree on terms, and let them move in while you wait for the paperwork. If the landlord later refuses consent, you have a problem. The new tenant is occupying without a valid lease, and you are still liable for the rent. Always get written consent before the new tenant takes possession. The consent should be in the form required by your lease.
Assuming you are automatically released from liability
Many business owners believe that once the assignment is done, they have no further obligations. That is not guaranteed. Check your lease and the relevant legislation. You may need a formal release or a deed of variation to be fully discharged. If the lease requires a deed of guarantee from you, you remain on the hook if the assignee defaults. This is a risk worth weighing carefully before agreeing to an assignment.
Submitting an incomplete consent package
Landlords need enough information to assess the assignee’s suitability and solvency. A typical package includes company or personal financial statements, business references, identification documents, and details of directors and shareholders. If you rush this step, the landlord can reasonably delay their decision while they ask for more information. Take the time to prepare a complete package upfront. It saves weeks of back-and-forth.
Ignoring the difference between assignment and sublease
These two options are not interchangeable. In a sublease, you stay the head tenant and remain liable to the landlord. The subtenant pays you, and you pay the landlord. In an assignment, the new tenant deals directly with the landlord for the remainder of the term. If you want to exit completely, assignment is usually the better route. If you only need temporary relief, a sublease might work, but you keep the risk.
How to assign a commercial lease in Australia
The process follows a clear sequence. Each step builds on the one before it, and skipping any of them creates problems later.
Review the assignment clause in your lease
Start by reading the lease. The assignment clause will tell you the specific conditions, timelines, and documentation required. Some leases require you to pay the landlord’s legal costs. Others require a deed of guarantee from the outgoing tenant’s directors. You cannot follow the process correctly until you know what your lease demands. If the clause is unclear or onerous, seek legal advice before proceeding.
Prepare a complete consent package for the landlord
Gather everything the landlord will need to assess the proposed assignee. This usually includes financial statements, business history, proposed use of the premises, fitout plans, and identification documents. For companies, you will also need details of directors and shareholders. The more thorough you are, the faster the landlord can make a decision. A sparse application invites delays and follow-up questions.
Submit the request and wait for written consent
Send the consent package to the landlord or their agent. Under the Property Law Act 2023, landlords must respond within a statutory timeframe. If they do not, they may be deemed to have consented. Keep records of when you sent the request and any correspondence that follows. If the landlord refuses, they must have a reasonable basis. For retail leases, unreasonable refusal is not allowed.
Formalise the transfer with a Deed of Assignment
Once consent is given, the transfer is documented in a Deed of Assignment. This legal document transfers all rights and obligations under the lease from you to the new tenant. Both parties sign it, and it should be approved by the landlord. If a deed of guarantee is required, that document is signed at the same time. The new tenant then deals directly with the landlord for the rest of the lease term.
If you are navigating this process and need quick answers on specific lease terms, a service like JustAnswer Real Estate Law can connect you with a professional who understands property transactions.
Frequently asked questions about lease assignment
Can a landlord refuse consent for any reason? ▾
What happens if the new tenant stops paying rent after assignment? ▾
How long does the landlord have to respond to a consent request? ▾
Can I assign a lease if I am selling my business? ▾
Who pays the legal costs of an assignment? ▾
What is the difference between assignment and surrender? ▾
Lease assignment is a tool, not a trap — if you follow the process
The Property Law Act 2023 has made the assignment process fairer for tenants by forcing landlords to respond within set timeframes and by introducing a duty of good faith. But the responsibility still sits with you to follow the correct steps. Read your assignment clause, prepare a thorough consent package, get written approval, and formalise the transfer with a Deed of Assignment. Do not assume you are free unless the documents say so. If you are unsure about any part of the process, speaking to a qualified professional is the safest route.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Essential Tips for Tenant Fit Out Lease in Australia.
Sources and Further Reading
The Great Downsizing Debate: Is a Smaller Commercial Space Right for Your AU Business? — Explores what to consider when your current space no longer fits your needs, including lease exit options.
Sprintlaw (2024). Lease Assignment Explained: Essential Australian Business Guide. 🔗
Attwood Marshall Lawyers (2024). Leasing Legalities: 5 Key Commercial Leasing Changes Under the New Property Law Act 2023. 🔗
Sprintlaw (2024). Understanding Commercial Rental Property Leases: Key Legal Tips for Australian Businesses. 🔗
