assignment of lease qld

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Assignment of Commercial Lease in Queensland: Key Legal Considerations

An Assignment of a lease in Queensland is a process where a Tenant (assignor) transfers their rights and obligations under a lease to another party (assignee).

This most commonly occurs in instances where a Tenant is:

• Selling their business and they lease a commercial property to operate the business; or
• Needs to vacate the premises before the lease term ends.

Understanding the legal framework and requirements for lease assignments is crucial for both Assignors, Landlords and the proposed Assignees.

This article sets out the key aspects of transferring a commercial lease and the steps that should be followed.

What are the Key Steps and Legal Requirements of an Assignment of Lease?

• Review the Lease

The lease will typically contain a clause regarding the requirements for an assignment. The current Tenant, known as the Assignor, must review the lease to understand if the lease can be assigned and if there is any relevant conditions or restrictions on the assignment.

Ordinarily the lease will state that the Assignor is required to obtain the Landlord consent to the assignment.

• Seeking the Landlord’s Consent

If the lease requires Landlord consent, the Assignor must formally request this.

The Landlord cannot unreasonably withhold consent but may impose conditions, such as requiring the new Assignee to meet certain financial criteria and proving that they are suitable to take on the Lease. An example of the documents that can be requested by the Landlord are as follows:

• Statutory Declaration of Assets and Liabilities of the proposed new Tenant and the proposed new Tenant’s Directors and Shareholders.
• Statement of Past Business dealings of the proposed new Tenant.
• Two (2) Character/Trade references of the proposed new Tenant.
• A copy of the Business Contract (if applicable); and
• Details of how the proposed new Tenant will finance the purchase of the business (if applicable).

The Landlords will also usually require confirmation that the Assignor will pay their legal fees.

• Disclosure Statement:

For Retail Shop Leases under the Retail Shop Leases Act 1994 , the Assignor must provide the proposed Assignee with a Disclosure Statement that includes key details about the lease and the premises and a copy of the Lease.

The Landlord must also provide a Disclosure Statement to the Assignee.

The Assignee is required to provide the Landlord with an Assignee Disclosure statement, as well as such information as the Landlord may reasonably require to be satisfied of the financial resources and retailing skills of the Assignee as outlined above.

• Prepare a Deed of Assignment:

A Deed of Assignment is a legal document that is prepared for an Assignment of lease.

A Deed of Assignment formalises the transfer of the lease by confirming the Landlords consent to the assignment of Lease, binds the Assignee to the terms of the lease and releases the Assignor from the terms of the lease.

It should be drafted carefully, outlining the rights and obligations of all parties.

The Deed of Assignment then needs to be executed by all parties.

• Tenant’s Obligations

Until the Deed of Assignment is executed and the Landlord has confirmed that their conditions of consent are satisfied, the Assignor remains responsible for fulfilling all lease obligations, including rent payments and property maintenance.

• Assignee’s Responsibilities:

Once the Deed of Assignment is executed, and the Landlord has confirmed that their conditions of consent are satisfied, the Assignee assumes all rights and responsibilities under the existing lease terms.

It is also important to note that a transfer of lease is treated as a dutiable transfer of land and the Assignee should understand and their requirements to lodge a Form 1 Transfer with Titles Queensland.

Obtaining Advice

Assigning a Lease in Queensland involves several legal steps and careful consideration of the Lease terms. Both Tenants and Landlords should ensure they understand their rights and obligations throughout the process.

If you require advice or assistance with any leasing matters, please contact the experienced team at Miller Sockhill Lawyers on 07 5444 4750 today.

The content of this article is current at the date of publishing and is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Grace Barnes, Lawyer

Registration of Commercial Leases    Commercial Lease – Making an Offer to Lease

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Assigning A Lease – How A Deed Of Assignment Works

When you’re entering or leaving a business premise as a tenant, it’s always good to check if you need to transfer a lease. In other words, if the owner is changing, you need to make this official with your tenant. 

This is known as ‘assigning a lease’ or ‘transferring a lease’. It occurs when you’re selling your business and the buyer agrees to be bound by the existing lease, or you’ve simply decided to move premises and have found another business willing to be bound by your current lease.

Essentially, when you assign your lease, you’ll be handing over the rights and obligations of that lease to another party . The last thing you want is to be liable for an old lease! 

This is also known as a Deed Of Assignment , which we’ve written about in more detail here . 

The Process Of Transferring A Lease

Transferring a lease doesn’t have to be a complicated process, so let’s break it down. 

1. Review The Existing Lease

First thing’s first – you’ll need to ensure that there aren’t any conditions on the lease that would stop it from being transferred. To do this, you might want to look at the terms of your lease, and even have a lawyer help you out with this step! 

2. Landlord’s Consent

Once you’ve determined that the lease is assignable, you’ll need the consent of the landlord in writing and identify what requirements you’ll need to fulfil.This can be different for each landlord, so make sure you and your landlord are both clear on what needs to be done. 

3. Discuss The Assignee

Now, you need to chat with your landlord about who will be taking over your premises, otherwise known as the incoming tenant. For example, you need to collect their name, contact details and relevant documents for the transfer. This might include documents to show their financial status, or their business experience. 

Once this is all taken care of, the landlord basically confirms their consent to the transfer, and the tenant also lets them know that they agree to it. This should be covered in what we call a Deed of Consent to Assignment . 

The assignee will also agree to inherit the rights under the existing lease from a certain date until the lease term ends. 

At this stage, it’s important for all parties to review the terms of the Agreement to ensure they are happy with what they need to do and for how long they will enjoy certain rights or interests in the lease. 

I’m The Outgoing Tenant – What Else Should I Do?

Once the landlord’s consent has been received, we can start putting together a Deed of Transfer of Lease!

This will officially release the tenant from any responsibilities or liabilities under the lease, but until this is official, you want to make sure you uphold your obligations. 

Retail Leases

If you’re transferring a retail lease, the steps you need to take might look a little different. You may want to take a close look at the Retail Leases Act 1994 , as this covers retail leases. 

For example, the following things might be worth considering:

• Under a retail lease, as long as you have provided proof that the incoming tenant has good financial standing, you can force the landlord to provide consent
• However, if the incoming tenant is not financially reliable, the landlord is under no obligation to provide consent

It’s important to understand what you can and can’t do depending on the type of lease you’re under. You can read more about transferring leases here . 

Whether you need one drafted or looked at, we’d love to help! You can reach out to our friendly team on 1800 730 617 or [email protected] for a free, no-obligations consultation about your specific situation and the legal documents that are right for you.

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Assignment of Lease

If you are selling or purchasing a business and the business is operated at a premises under a lease, the transaction would necessarily include assignment of the lease (also known as transfer of lease) from the seller (being the assignor) to the purchaser (being the assignee).

As a seller, it is important to revisit the terms of the existing lease of the premises to identify whether the lease can be assigned and the terms and conditions relating to the assignment of the lease. 

Typically, the seller is not permitted to assign the lease except with the landlord’s consent and there are requirements that must be complied with before the landlord’s consent will be granted, including but not limited to the following:

(a) specific notice requirements;

(b) credentials of the purchaser are satisfactory to the landlord;

(c) the assignor has complied with all terms in the lease and there is no breach or unremedied breach of the lease;

(d) the landlord’s reasonable costs in relation to the granting of its consent is paid. (This is usually up for negotiations between the assignor and the assignee as to who is to pay for this cost or how to share the cost;

(e) the assignor, guarantor, assignee and incoming guarantor entering into a deed of consent on terms satisfactory to the landlord;

(f) the assignee providing security reasonably required by the landlord.

Some sellers may prefer to avoid having a conversation with the landlord, especially if the relationship with the landlord is difficult. However, we do not recommend ignoring the requirements for the landlord’s consent as parting with possession of the premises upon a sale of a business without the landlord’s consent would constitute a breach of the lease, and will entitle the landlord to terminate the lease and retake possession of the premises.

If the lease is approaching expiry with few or no options or has expired, we suggest the seller finalises any renewal of lease or new lease to extend the lease term or amendment of lease to include further options, before listing the business for sale. A longer lease term is usually more attractive to buyers as it provides them with stability and certainty of having a premises for a sufficient term. By finalising any new lease, renewals or additional further options, a seller can also avoid the contract of sale of business being dependent or conditional upon the landlord’s approval to extend the lease term or provide further option terms, which is usually in the absolute discretion of the landlord and not within the control of the seller. 

It is the assignor/seller who approaches and seeks the landlord’s consent, although the assignee/purchaser can be included in the negotiation process.

As a buyer, it is important that the terms of the lease be carefully reviewed and that a thorough due diligence be conducted to ensure:

• the premises is suitable for your proposed business and has the appropriate approvals or certification for its use;
• there is no unsatisfied condition under the lease;
• you are able to meet the obligations as the tenant under the lease; and 
• it is commercially viable for you to conduct the business at the premises. 

A buyer should ensure that it has documentary evidence to substantiate its experience in conducting the relevant business and financial ability to meet the obligations under the lease. These documentary evidence could be in the form of the buyer’s financial statement, asset and liabilities statement, business plan, qualifications in conducting the particular business (if applicable) and references. Typically, the landlord will require the buyer to furnish this evidence before considering any request from the seller to assign the lease. 

A buyer should also make enquiries and ensure that there is no unremedied breach of the lease by the seller as at the assignment date. This is because the assignee steps into the shoes of the tenant and takes on all liabilities under the lease from the commencement date, once the lease is assigned. A solution to this would be to limit the assignee’s liabilities under the lease to those from the assignment date. This limitation of liability and even an acknowledgement that there are no liabilities or breaches should be included in the deed of consent to assignment, which is to be entered into by the assignor, assignee and the landlord. 

On the other hand, a seller would want to ensure that it is released from any claims or liabilities under the lease from the assignment date, provided that there is no existing unremedied breach of the lease. This release of liabilities should be included in the deed of consent to assignment. 

Retail Shop Leases 

If the premises is a retail premises as defined in the relevant legislation of the state, there may be specific terms which are implied in the lease pursuant to the relevant legislation and there may be disclosure obligations imposed on the respective parties in relation to an assignment of lease. You should seek professional legal advice to ensure that implied terms under the relevant legislation and disclosure obligations are complied with.

We have extensive experience in the conduct of sale and purchase of businesses and we are able to assist in the pre-contractual review and negotiation, legal due diligence of the business, the transfer of the lease and any other supply and service contracts up until the completion of the sale or purchase of the business. 

If you wish to discuss or require assistance with your business’ sale or purchase, please do not hesitate to contact the writer.

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The Impact of Queensland’s new Property Law Regime on Lease Assignments – Part 2 (s143)

by Elizabeth | Oct 30, 2023 | Lease Agreement , Lease Assignment , Property Law | 0 comments

Part 2: Effect of Assignment of Lease by Lessee to Assignee (Section 143)

The Property Law Bill 2023 (Qld) stands as a monumental piece of legislation set to modernise property law in Queensland. Since its introduction in the Queensland Parliament on 23 February 2023, it has been the focal point of substantial attention and anticipation. In our previous segment, we explored the alterations proposed by Section 142 of the Bill, outlining the new processes for lessors and lessees engaged in lease assignments. Now, in the second part of our series, our focus turns to Section 143 of the Bill, which delineates the practical impact of the Bill on the transfer of lease terms between lessees and assignees. 

Section 143 – A Shift in Lease Assignments

Section 143 of the Bill introduces a pivotal concept known as the ‘doctrine of privity of estate,’ a cornerstone principle governing the transfer of lease agreements. Under this doctrine, when a lease is assigned, the assignee inherits both the privileges and responsibilities originally outlined in the lease. In essence, the assignee steps into the shoes of the original lessee, embracing not only the benefits but also the obligations embedded in the lease.

Nevertheless, the Bill recognises that there are circumstances where a rigid adherence to this doctrine may not be equitable or just. To address these subtleties, the Act presents specific exceptions, allowing the assignee’s obligations and rights to diverge from the doctrine of privity of estate.

Exception 1: Personalised Lease Terms

When the original lease specifically labels a term as personal to the original lessee, the assignee is not obligated to comply with or does not gain the advantage of that term. This provision empowers lessees to negotiate lease agreements, specifying certain terms as exclusive to their unique relationship with the lessor, thus preventing their automatic transfer to future assignees.

1.     Exclusivity Clause: This clause serves as a safeguard against the lessor renting to a competing business within the same building.

2.     Right of First Refusal: This clause grants the lessee the first option to purchase the premises before it’s put on the market for sale.

3.     Specialised Usage Rights: An example of this clause is where the lessee is granted exclusive usage rights to certain common areas during the lease term (i.e. storage space, carpark, swimming pool).

While these types of provisions are undoubtedly beneficial to lessees, it’s important to recognise that lessors may not always wish to be bound by them if the lease is assigned to a new lessee. In such cases, parties involved can mutually agree that the rights granted under these clauses are personal to the original lessee, thereby maintaining flexibility and ensuring that the lease agreement aligns with the changing dynamics of the property market.

Exception 2: Express Exclusions in Lease

If the original lease explicitly excludes the application of Section 143, the assignee is not bound by the default provisions of the doctrine of privity of estate. This provides parties with the flexibility to customise their lease agreement, superseding standard provisions with specific terms.

This exception empowers parties to maintain control over the lease agreement and its terms, ensuring that it accurately reflects the evolving dynamics of their business relationship. Such autonomy benefits both lessors and lessees, allowing them to craft a lease agreement that best suits their unique needs.

Lessors can also use this exception to protect their interests by excluding or modifying certain provisions that might pose potential risks in the future. This enables them to create a lease agreement that aligns with their long-term goals and strategies while fostering a positive and mutually beneficial leasing relationship with the original lessee.

Exception 3: Agreement between Lessee and Assignee

The new Property Law Act will allow for both the lessee and assignee to jointly decide that specific term benefits will remain with the lessee. This decision must be in writing and is subject to two key preconditions:

1.     The benefit of the term accrued to the lessee prior to the assignment.

2.     The lessor provides explicit consent for the term benefit to remain with the lessee after the assignment.

This exception allows lessees the opportunity to safeguard the has negotiated an option to purchase the land, they can ensure that they can exercise this right even after assignment.

This provision in the legislation promotes flexibility and collaboration in lease assignments, allowing all parties to actively participate in shaping the lease’s future. It encourages open communication and negotiation to ensure a fair and equitable assignment. 

Section 143 of the new Property Law Act introduces a harmonious blend of legal principles and practical considerations. While the doctrine of privity of estate remains a cornerstone, the new legislation places a strong emphasis on the importance of flexibility and adaptability within lease agreements. The exceptions outlined in this legislation offer a unique opportunity for all parties involved to craft lease terms that align with their objectives, protect their interests, and promote a transparent lease assignment process.

As we await the full implementation of the new Property Law Act in Queensland, stakeholders within the property sector are encouraged to take a proactive approach in embracing these changes. A comprehensive understanding of Section 143’s provisions, their far-reaching implications, and the wealth of opportunities they offer can pave the way for well-informed decision-making. Additionally, this proactive engagement will play a pivotal role in preventing potential disputes and nurturing a lease assignment landscape that not only upholds stability but also encourages innovation.

Contact us today on (07) 3161 2847 or [email protected] for personalised guidance, tailored solutions, and expert insights that will safeguard your interests and foster a smoother transition in this evolving legal environment. Your success is our priority, and we’re ready to be your trusted partner in property law.

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When We All Understand the Assignment: Assigning a Retail Shop Lease as Part of a Commercial Business Sale

Posted in: Business Law , Commercial Lease

An easily overlooked element of a commercial business sale is that of assigning the existing lease, which is key in enabling the buyer to continue operating the business in the same premises where the seller currently resides. While the steps involved, in assigning the existing lease, may be relatively straightforward the time and effort in meeting the legislated disclosure requirements can become a hefty hurdle when approached haphazardly.

Under the Retail Shop Leases Act 1994 (Qld) (‘The Act’) , there are a multitude of time specific disclosure requirements to be undertaken by the seller (Lessee/Assignor), the buyer (Prospective Tenant/Assignee), and the landlord (Lessor) to ensure the assignment is binding. A failure of any party to meet these disclosure requirements within the specified time periods may result in an unenforceable agreement, entitling the Buyer or Landlord to terminate the assignment of lease, leaving the Seller high, dry and in breach of the sale contract.

With adherence to these disclosure details and time frames required under all retail shop leases (defined in section 5A of The Act ), it is highly advantageous for all retail business owners to have at least a basic understanding of what is expected when seeking an assignment of your lease.

Generally speaking, when entering into a retail shop lease, the key questions and considerations made by a business owner typically focus on matters that directly impact the daily operations and profitability of their business, such as:

• onboarding costs of bond, prepayment of rent, solicitors, insurances, fit-out, etc
• day to day costs of rent, outgoings, maintenance (including air-conditioning servicing), etc
• The length of the lease period and whether further options are available;
• Any building covenants or restrictions on use of the premise; and
• Consideration of instances where a ‘force majeure event’ such as Covid-19, or extensive damage to the property, as evidenced by the recent floods, results in it becoming unusable for the initially leased purpose.

While all of these elements are at the core of what could make or break a business’ success in a leased space, an important aspect that can be easily overlooked by a new Lessee are the steps required in assigning a lease when the time comes to sell their business.

Understandably, the last thought on a new business owner’s and/or prospective lessee’s mind is related to selling the business. However, knowing in advance what is involved to transfer a lease may be the key to avoiding missteps, unexpected delays, and unnecessary costs impacting the business owner’s sale proceeds or even leading to the potential collapse of the contract of sale.

The steps, while easy enough to be managed with sufficient planning and time, when rushed can be time consuming and unexpectedly burdensome to an unprepared Lessee simply looking to get the best price from the sale of their business.

Disclosure Requirements under the Act

As required under the Act, the following disclosures need to be completed to assign a lease in Queensland:

• The Lessor must complete a “Lessor disclosure statement to Assignee”, which provides details of the Lease and other relevant tenancy details.

2. The Assignor must complete an “Assignor disclosure statement to Assignee”, which outlines details of the lease and other relevant tenancy details.

a. With it, the assignor must provide a copy of the Lease, and any amendments and/or previous assignments.

b. This disclosure is to be provided a minimum of 7 days prior to the Assignor requesting the Lessor’s consent to the assignment of the lease unless a waiver is provided.

3. The Assignee must complete an “Assignee disclosure statement to Assignor” which requires disclosure of relevant details of the Assignee to facilitate the Lessor’s assessment of whether they are a fit and proper lessee.

a. This disclosure must also be provided a minimum of 7 days prior to the Assignor requesting the Lessor’s consent to the assignment of lease.

4. The Assignee must complete an “Assignee disclosure statement to Lessor”. Part of this disclosure requires a duly executed Legal Advice Report and Financial Advice Report.

a. These two reports are to verify that the Assignee has received the relevant legal and financial advice prior to agreeing to consent to the assignment of the existing Lease.

b. It should be noted that these reports are not necessary for a “Major Lessee”, that being a Lessee / Assignee who is a lessee of 5 or more retail shops in Australia.

As noted above, in lieu of meeting the required 7-day minimum disclosure periods, a Waiver Notice (waiver) may be provided by the relevant party. In providing a waiver, a Non-Major Lessee must also produce a legal advice report verifying that they have received legal advice regarding the implications of their waiver.

Once all the above have been provided in accordance with the relevant time periods or accompanied by a waiver, a Deed of Assignment can be executed by all parties to the lease. This deed will generally outline the conditions upon which the buyer will be taking over the existing lease, including binding them to the existing lease in place of the assignor, as well as outlining the obligations of the assignor (if any) upon completion of the assignment.

Why go through the trouble?

Beyond being a legislative requirement to ensure the assignment is legally binding, a major benefit that results from adherence to The Act’s assignment disclosure requirements is brought about through section 50A. Section 50A releases an assignor (and any existing guarantor/s) from all liabilities or obligations that arise under the lease after the date of assignment, regardless of the terms contained within the Deed of Assignment. It is this specific section that makes all of the assignor’s efforts in adhering to the Act’s disclosure requirements worthwhile, as it effectively provides the assignor with a legislative release from all future lease liabilities post-assignment date.

While the extent of information required to meet the above disclosure requirements will differ depending on the parties involved, considerable time and resources will likely be exhausted in ensuring all elements of the above steps are met. Specifically, if a seller is not sufficiently prepared, the time required for parties to collect information, receive legal and financial advice, ensure all documents are duly formatted and executed and the eventual protracted correspondence between all parties, can easily result in key dates being missed or delayed, putting the entire business sale at risk of collapse.

Although an assignment of a lease may only be a small portion of a business sale, due to the number of steps requiring prudent action from all parties involved, there are ample opportunities for unexpected delays to occur. By knowing in advance what is required to complete these steps, a Seller can take early action to ensure all required information is prepared, easily accessible, and ready for production as soon as possible in the sale process.

If you are looking to buy or sell a business or are looking to enter into or renew a lease, our team can assist in ensuring you are prepared in advance and your interests are protected.

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Signing a business premises lease

Tenancy costs tend to be one of the main overheads for small businesses. Disputes between landlords and tenants are common and often arise from small business owners not seeking advice or not understanding the significant impacts a lease can have on the financial viability of their business. Knowing who you are dealing with and what else is available before signing a business lease can help to avoid letting your heart rule your head in this critical business decision.

Before you sign a lease, you need to be confident that you understand and can meet all the terms and conditions. To find out if the lease is suitable for you, and to avoid expensive misunderstandings that could cost you money and potentially your business , consider these questions and discuss the answers with your solicitor and financial adviser.

Lessor or lessors agent

• Does your contract say a lot but actually tells you very little?
• Are you left wondering what it's all about?
• Do you get the feeling that information is being withheld?
• Are you immediately pressured to sign on the spot?
• Is the discussion relaxed – no pressure to sign – with time for you to properly consider things and take appropriate advice?
• Who pays the legal costs for establishing the lease?
• When does the lease start? What time period does it cover?
• Will the lease period give you time to make enough profit to get a reasonable return on your investment?
• Can both parties engage a specialist retail valuer if there is a dispute over market rent?
• What is the rent? Is it paid weekly, monthly or in advance?
• Is a deposit or other payment required?
• How are rent increases worked out?
• What happens if rent payments are late?
• Do you have an option to buy the premises?
• Can you renew the lease? When, and for how long?
• Can you end the lease before it expires? If so, what are the conditions?
• Is subletting possible? If so, what are the conditions?
• Can you transfer the lease? Are any expenses involved?
• Are there additional charges for outgoings such as rates, taxes, garbage, air conditioning or marketing? How are these charges worked out?
• Have you considered expenses such as electricity, cleaning, repairs, maintenance and refitting?
• Who is responsible for taking out the various types of insurance ?

Restrictions

• Are there restrictions on the type of business, its goods or trading hours?
• When you leave the premises, can you remove fixtures, fittings or furnishings you have put in?
• Will any lease terms affect the ongoing profitability of your business?

Maintenance

• Does the lease require you to maintain the premises? At whose cost?
• Can alterations or improvements be made to the premises by either party? Are there conditions?
• Do you have to return the premises to pre-lease condition?

Assignee/assignor involvement

• Has the assignor* got written approval for the assignment of the remainder of the lease?

*If you are buying a business and the seller has a lease as part of that business, they are known as the assignor. The assignor requires approval from the landlord for the assignment of the remainder of the lease to the purchaser of the business (assignee).

Also consider...

• Learn more about working with business advisers .
• Find out more about retail shop leasing .
• Read the Retail Shop Leases Regulation 2016 .
• Find retail shop leases forms .
• Read a legal guide to business leases from the Queensland Law Society.
• Learn out how to conduct financial forecasting for the future of your business.
• Watch our Understanding tenant agreements webinar to learn about the common pitfalls of business tenancy.
• Last reviewed: 7 Jan 2021
• Last updated: 1 Feb 2022
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LEASE – ASSIGNMENT OF A RETAIL SHOP LEASE

When you are considering buying or selling a business which is currently operating under a retail shop lease, it makes sense that the transaction would necessarily include the assignment or transfer of the retail shop lease from the existing business owner to the incoming purchaser.

Our lawyers have previously written an article on the difference between retail shop leases and commercial leases (which you can read here ), however this article is specifically written to provide information on the process to have a retail shop lease transferred to an incoming purchaser, and the steps that need to be taken under the relevant legislation.

The Retail Shop Leases Act 1994 (Qld) (RSLA) sets out the process of assigning a retail shop lease, including the pre-assignment procedures, disclosure requirements, legal/financial advice requirements and other miscellaneous general provisions which are applicable to retail shop leases.

Generally speaking, the assignment of a lease is required when the existing tenant is unable to complete the term of their lease, and seeks to transfer the time that is left on the lease to another party, for example the incoming purchaser. Essentially, the assignment results in the purchaser stepping into the original tenants shoes for the remainder of the lease rather than the creation of a new lease by way of a sub-lease.

Further, most Retail Shop Leases require the prospective purchaser to obtain a Legal Advice Report and a Financial Advice Report prior to signing the lease (if you have less than 5 retail leases under your belt).  Our Gold Coast team have a multitude of experience in this area, and are able to provide you with this Legal Advice Report if needed.

It is often a pre-requisite to the assignment of a retail shop lease that the landlord provides their consent to the assignment, and the lease will generally set out the way that this must occur, i.e. the notice period, whether the request must be in writing etc and a failure to do so may invalidate the request and could also be regarded as a breach of the lease.

The legislation also outlines specific disclosure obligations which must be conducted in accordance with strict timeframes before an assignment of the lease can be entered into.

These disclosure obligations include the current tenant providing a disclosure statement and copy of the current lease to the proposed assignee, at least 7 days before the proposed assignee signs a business sale contract or the day on which the current tenants asks the landlord to consent to the proposed assignment of the lease, whichever occurs earlier.

In addition, the landlord must also provide a Lessor Disclosure Statement to the proposed assignment which mirrors the disclosure statement given by the current tenant, however it is provided from the point of view of the landlord and includes further information about the lease, the retail shop premises and the calculation of the rental payments.

If the tenants or the landlord’s disclosure statements are provided out of time, then there are ways to rectify the issue, however it is best practice to abide by the timeframes as stipulated, if possible, to avoid possible complications and/or increased costs.

As part of the disclosure requirements, the proposed assignee must also provide a disclosure statement to the current tenant, which should be provided before the current tenant seeks the consent of the landlord to the assignment.

Upon the current tenant seeking the landlord’s consent to the assignment, a copy of the disclosure statement which was provided to the proposed assignee will also be provided to the landlord.

In this way, the preliminary disclosure between all parties (landlord, current tenant and proposed tenant) should provide sufficient information and assurance to the parties in order to proceed with the assignment of the lease.

There are various compensation provisions detailed under the RSLA which may apply to circumstances where disclosure statements have been defective/false/misleading, and have resulted in the entry into, or the assignment of a lease.  Requirements to pay compensation in those circumstances include the landlord and can extend to existing tenants as well as the incoming/prospective tenant.

Does the landlord have to provide consent?

The terms and conditions contained in the lease, and implied terms under the relevant legislation, will determine whether the landlord has the ability to decline to consent to the proposed assignment.

Generally speaking, the landlord must not ‘unreasonably withhold’ consent to a proposed assignment, however the test to determine what is ‘reasonable’ is objective, and there is no definitive rule which will apply. Essentially, it will come down to the individual circumstances of the case.

We can however look at some of the Court’s historical decisions to see what has previously been considered as reasonable grounds for the refusal of consent, and use these as a guideline when contemplating an assignment of a lease.

Such grounds have included:

–          the ability for the proposed tenant to be able to fulfil the tenants obligations under the terms of the lease (i.e. are they a ‘respectable and responsible’ person);

–          whether a proposed assignment is likely to affect the redevelopment interests in the property that the landlord has, or their capacity to lease out other parts of the property;

–          a possible depreciation or reduction in the value of the land;

–          where there is a potential negative impact on the commercial reputation of the landlord amongst future lessees.

In any event, if you are contemplating entering into a Retail Shop Lease, or you are looking at buying or selling a business to which the RSLA applies, we strongly recommend that you contact one of the experienced property lawyers at Affinity Lawyers today to obtain independent legal advice as to your rights and obligations.  Please contact us today on 07 5563 8970.

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Guide to Retail Shop Leases in Queensland

Signing a lease is a major financial and legal commitment. It is at least as significant as buying a home and signing a mortgage. As with all financial commitments, it’s essential to diligently and meticulously consider the obligations you must meet as a lessee.

This guide will help you understand legal terminology and some of the statutory protections that are afforded to retail shop leases. It is not a substitute for having reviewed by an experienced business lawyer and obtaining recommendations as to what changes should be proposed to the landlord before signing up to the lease.

What Is a Retail Shop Lease?

A lease is a “retail shop lease” if the lease conducted on the premises meets either of these three conditions:

• it is in a Retail Shopping Centre, ie a single-level building where five or more retail shops are located such as shopping malls or arcades; or
• it is in a multi-level building on a floor that contains at least five retail shops; or
• It is used wholly or predominantly for carrying on a Retail Business as described in the schedule to the Regulations to the Retail Shop Leases Act (RSLA).

What businesses qualify the premises as a Retail Shop?

The regulations list each type of business that comes within the definition. Generally, if you are engaged in the business of selling goods directly to customers for their use or consumption, then you are very likely entering into a retail shop lease.

Examples of “retail shops” are restaurants, fashion boutiques, pet supply stores, convenience stores, bakeries, butchers, and similar retail businesses.

What premises can NOT be Retail Shops?

Some businesses you might expect to be regarded as retail for example: hairdressers; gyms; doctor’s surgery; real estate offices; travel agencies; and repair shops do NOT fall within the definition because they provide services rather than sell goods UNLESS the premises are located within a Retail Shopping Centre or are in a multi-level building on a floor that contains at least five retail shops.

Regardless of their use, leasing the following premises can not constitute a retail shop lease — and therefore, are not covered by the RSL Act:

• premises with a floor area greater than 1000 m2;
• premises not carrying on a retail shop business located in a centre where 25% or less of the total area is occupied by retail shops (eg where the majority of the occupants are professional or commercial offices);
• theme park and amusement park shops;
• premises providing entertainment, telecommunication, or leisure;
• premises used for storage (such as warehouses) or parking vehicles;

Is There a Minimum Term For A Retail Shop Lease?

No. Unlike other states which require a minimum of 5 years, there is no minimum term for leasing a retail shop in Queensland.

What protections apply to Retail Shop Leases?

The Retail Shop Leases Act 1994 (Qld) affords retail tenants a far higher degree of consumer protection by prohibiting some leasing practices that are otherwise permitted in commercial leases and by imposing landlord obligations. The protections include the following.

Lease preparation costs

A landlord is prohibited from compelling a tenant to reimburse it for the legal costs it incurs in relation to preparing a retail shop leases. Note that tenants can still be charged for lease registration costs, surveyors charges and if any costs are required in relation to obtaining the consent of the landlord’s mortgagee to the lease.

• Disclosure statement

During the negotiation stage and at least 7 days before the tenant enters the retail shop lease, the RSLA requires the landlord to provide the prospective tenant with two documents:

• A draft of the lease, and

A disclosure statement sets out the essential terms (rent, term, permitted use, rent increases, outgoings contributions, options to renew etc) of the prospective lease lease. The intention is to allow the tenant to quickly see whether there are any acceptable commercial terms that are proposed.

If such statement is either incomplete or contains false information or if it is given later than 7 days before the start of the lease – the tenant is allowed to terminate the lease within 6 months from the date it was entered in to.

Additionally, the tenant also has the right to seek compensation in case for any losses sustained as a result of any false information contained in the disclosure statement.

Key Money payments

Key money is a non-refundable benefit — usually cash — that a landlord asks the tenant to pay over and above rent and outgoings, in exchange for the grant of the lease. The RSLA prohibits such payments.

Key money is different from a security deposit. A security deposit is always refundable — and is therefore allowed by law to be paid to the landlord, while key money is always non-refundable.

Rent reviews 

A retail lease is required to specify only one method of annual rent review eg: a fixed amount; a fixed percentage escalation; CPI increases; or a market review.

A ratchet rent review clause operates to prevent – on the occasion of a market review of rent eg at the time of exercise of an option – rent being decreased or limits the extent of any rental decrease applied.

A dual method rent review clause operates to allow the landlord to specify that on any rent review date, it can choose between two or more rent review methods OR specifies that rent will be reviewed upwards by whichever of two or more methods would result in the highest rent outcome.

Ratchet rent review  and dual method rent reviewclauses allow landlords to maintain high rents despite downward movement in market conditions and are prohibited by the RSLA.

Option to Renew

An option to renew is a specific clause in the retail lease agreement that gives the tenant the right to choose whether to extend the lease.

If the tenant does not exercise an option to  renew the lease, then the lease comes to an end at the expiration of the lease term or the landlord can compel the tenant to accept different terms should it wish to remain in occupation of the premises.

A typical  option provision specifies that the tenant must give notice of intention to renew at least six months prior to the expiration of the original term and allows for the new rent to be determined after the option is exercised.

Where the RSLA applies, the situation is different. A Retail Shop Leases tenant can:

• call for a determination of the new rent 6 months prior to the expiration of the current term (in the case of leases of 12 months or less, 3 months prior); and
• decide within 21 days following the determination of that rent whether or not to exercise his option to renew the lease.

The landlord is also obliged to give the tenant written notice of a pending option renewal date at least 2 months before (and up to 6 months) before the last date of the current term of the lease.

Renewing lease if no option to renew

If there is no option to renew contained in a retail lease, the landlord is obliged at least 6 months prior to its expiration (in the case of leases of 12 months or less, 3 months prior) to notify the tenant in writing as to whether or not he intends to offer the tenant a new term of lease.

Failure to do so means that the Tenant is automatically entitled to a six-month renewal on request, if the request is made before the expiration of the lease term.

Disputes and Compensation

Under the RSLA, any disagreements or disputes that arise between the tenant and landlord can be resolved by a 2-step process:

• If the dispute is not settled during mediation, it shall be referred to of the Queensland Civil and Administrative Tribunal (QCAT)

A tenant may claim compensation for losses occasioned by the actions of a landlord, the landlord:

• substantially restricts access to the leased premises;
• substantially restricts customers from accessing the premises; or
• significantly disrupts the tenant’s business in any way.

Compensation for business disturbance

The landlord is liable to pay compensation to the tenant if, in relations to items that are its responsibility under the lease:

• it does not rectify breakdowns or building defects as soon as possible;
• it neglects the cleaning, repainting, or any other maintenance of the premises; or
• causes a  tenant to before the end of the lease because of works relation to an extension, refurbishment or demolition of a shopping centre or building.

To claim compensation, the tenant is required to provide a notice to the landlord of any loss or damage incurred.

Unconscionable Conduct

The RSLA also protects tenants by prohibiting the landlord from engaging in unconscionable conduct in relation to the leased shop. It does not specify particulars of conduct that is unconscionable but rather sets out circumstances in which such conduct might meet that description including where the landlord:

• demands the tenant to comply with unnecessary conditions.
• exerts unwarranted influence, pressure, or selfish tactics against the tenant.
• fails to disclose planned conduct that might be detrimental to the tenant.
• shows an unwillingness to negotiate.
• fails to act in good faith.

Lease review

It is always prudent to have an experienced business lawyer examine commercial documents like leases, before you sign them. Often, your lawyer will be able to negotiate very beneficial changes to the terms that are proposed by a landlord. The lawyer will explain the intricate details of all the obligations you are obliged to meet in the circumstances in which you are obliged to observe the landlord’s requirements.

If you want to learn more about your obligations and rights under the Retail Shop Leases Act, contact QLD Business + Property Lawyers today.

Last updated: 12 April 2023

Disclaimer: This information is designed for general information in relation to Queensland Business + Property Law. It does not constitute legal advice. We strongly recommend you seek legal advice in regards to your specific situation. For expert advice call 1300 590 613 or chat via live chat to arrange free initial advice.

Do you have any questions?

If you have a question, seeking more information or would just like to speak to someone, make an enquiry now and we’ll be in touch with you.

Assignment Of A Lease

Changes under the retail shop leases act.

Are you fully aware of your disclosure obligations under the Retail Shop Leases Act 1994 ?

If you are buying or selling a retail business with a lease, or if you are a landlord involved in such a transaction, it’s important that you are aware of your disclosure responsibilities under the Retail Shop Leases Act 1994 (the Act) . There have been recent changes to the Act so even if you are familiar, this article is a good opportunity to refresh your knowledge.

As a starting point, it may be helpful to review the meaning of some terms under the Act.

• Assignor: A tenant who transfers their lease to someone else, e.g. when selling a business.
• Assignee: A prospective tenant who takes over an existing lease from an existing tenant, e.g. when buying a business.
• Lessor or Landlord: The owner of the leased premises.

Assignor Disclosure Obligations

When the lease assignment is in connection with the sale of a retail business by the assignor to the assignee, the assignor must give the assignee an assignor disclosure statement as well as a copy of the current lease at least 7 days before the earlier of:

• The day on which the assignee enters into the business sale contract; or
• The day the lessor is asked to consent to the assignment.

Please be aware that this is a recent change to the legislation . Previously the requirement was to provide the assignor disclosure statement 7 days before the lessor was asked to consent to the assignment.

It is now possible for the assignee to waive the 7 day period with a waiver notice, provided they have already been given a copy of the assignor disclosure statement and a copy of the current lease

The assignor must also give the lessor a copy of the assignor disclosure statement given to the assignee on the day the lessor is asked to consent to the assignment. The lessor must respond to the request for the assignment of the lease within one month and failure to do so will result in the assignor having the right to bring a retail tenancy dispute before the Queensland Civil and Administrative Tribunal (QCAT).

Assignee Disclosure Obligations

The prospective assignee must give an assignee disclosure statement to the assignor before the lessor is asked to consent to the assignment.

The prospective assignee must also give an assignee disclosure statement to the lessor before the assignment is entered into.

For the purposes of the Act, an assignment is deemed to be entered into on the earlier of:

• The date by which the deed of assignment is signed by landlord, tenant and assignee.
• The date the assignee, with the consent of the landlord, takes possession of the premises

Lessor Disclosure Obligations

The lessor must give the prospective assignee a lessor disclosure statement as well as a copy of the lease at least 7 days before an assignment of a retail shop lease is entered into.

It is possible for the assignee to waive this requirement for a 7 day with a waiver notice and a legal advice report , provided they are given a copy of the lessor disclosure statement and a copy of the lease.

Failure by any party to provide a required disclosure statement

If a disclosing party fails to comply with the disclosure requirements then a retail tenancy dispute will exist between the parties. Unlike a situation of failure to provide a disclosure statement upon the commencement of a new lease, here there is no automatic right to terminate the assignment.

If it is within 2 months after the assignment is entered into, the party that should have received the disclosure statement can apply to QCAT for an order that the document is provided.

Should you wish to discuss in more detail how your business may be affected, please do not hesitate to contact our office and speak to one of our commercial lawyers .

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Important Considerations in Seeking a landlord’s Consent to Assignment

This article explores the key points which tenants must consider when seeking their landlord’s consent to an assignment of their lease. The topic may conveniently be divided into five sections, as follows:

• has an application for consent was submitted by the tenant? 
• what information can the landlord request in respect of the assignee?
• did the landlord withhold its consent to the assignment?
• was it unreasonable for the landlord to withhold its consent, contrary to s133B of the Conveyancing Act 1919 (NSW) (the Act ) (which provides that, where a lease requires the landlord’s consent to an assignment of the lease, the landlord’s consent must not be unreasonably withheld)?
• will the tenant be released from all future liability under the lease after the assignment?

Has an application for consent been submitted?

The starting point for a tenant is to submit to the landlord (usually) a written request to assign its leasehold interest in accordance with the terms of the lease ( Tenant’s Notice ). The landlord’s obligation to consider the tenant’s request for assignment only arises upon receipt of the Tenant’s Notice. In decision of Tamsco Ltd v Franklins Ltd 1 , the Court emphasised the significance of the tenant actually having to actually request the landlord’s consent. 

This is the case even where ‘the assignee is a person to whom there could be no reasonable objection 2 .  Before the tenant provides information relating to, for example, the assignee’s financial capabilities required for obtaining the landlord’s consent, it must properly communicate its request for consent to the landlord (in compliance with not only the assignment provisions, but also the notice provisions under the lease). 

What information can the landlord request in respect of the assignee?

The starting point here is to consider the terms of the assignment provision of the lease, which should specify the information the tenant must provide to the landlord in respect of the assignee. 

For example, many leases will require the tenant to prove to the landlord that the assignee:

• is a respectable, responsible and solvent person, capable of complying with the terms of the lease; and
• has adequate financial standing not inferior to that of the tenant. 

In this respect, it is common for tenants to provide to the landlord copies of the assignee’s tax returns and balance sheets (to evidence the adequate financial standing and solvency) and references from peers to evidence their responsibility and respectability in operating their business within the relevant industry. 

It should be noted that a landlord may not ‘oppressively demand extensive particulars or insist upon the equivalent of answers to interrogatories’ 3 .  All that is required is fair dealing between the parties to enable the landlord to make a ‘reasonable decision’ 4 .  So, it is important that landlords do not request any information inconsistent with what is permitted by the terms of the lease or which is irrelevant for the landlord making an informed decision in relation to whether its consent should be provided. 

Did the landlord withhold its consent to the assignment? 

The question here is whether after:

• formally requesting the landlord’s consent; and
• submitting to the landlord all information relating to the assignee required by the landlord (as dictated by the assignment provisions in the lease) to assess whether its consent should be provided to the assignment,  the landlord has refused to consent to the proposed assignment. 

In practice, where a landlord refuses to consent to an assignment of the lease, it will serve a notice to that effect on the tenant. However, where landlords are silent on whether they have consented to the assignment, their conduct becomes relevant for consideration. Courts have decided that some landlords, by virtue of their conduct alone, have consented to assignments. This occurred in Chamberlain Group Pty Ltd v Kids for Life Academy Pty Ltd 5 ,  where the landlord, for example:

• had knowledge that the assignee was already occupying the premises and did not object to such occupation; and
• collected rent from the assignee 6 .   

If the landlord did withhold its consent, was it unreasonable for it to do so? 

A landlord will have typically acted unreasonably where it has refused to provide its consent to an assignment for purposes unconnected with the subject matter of the lease 7 . For instance, it is generally unreasonable for a landlord to refuse to provide its consent to obtain a ‘collateral advantage’ which has no relationship with the terms of the lease. 

An example of this may include a landlord making the granting of its consent conditional upon a lump sum cash payment by the tenant to the landlord, an advantage which the landlord would not have otherwise been entitled to under the lease.

Will the tenant be released from all future liability under the lease after the assignment?

For commercial leases, if a lease is silent in relation to whether a tenant is released on assignment, then the tenant will not be released on assignment.  

For example, this will mean that where the assignee fails to pay rent under the lease after the assignment occurs, the landlord may still sue the tenant to recover the unpaid rent. 

If a tenant wants to be released on assignment, it is important for it to include an express release on assignment in the lease agreement or negotiate an express release within the deed of consent to assignment.

What does this mean for tenants?

Tenants must ensure that they have properly communicated to the landlord their request for the landlord’s consent to an assignment of the lease. It is always prudent to prepare the request in writing and serve it on the landlord in accordance with the notice provisions in the lease. 

Where the landlord has considered the request and unreasonably refuses to provide its consent, there are remedies available to tenants. Notably, tenants may seek a declaration by the NSW Supreme Court to the effect that the landlord has unreasonably withheld its consent to the assignment, contrary to section 133B of the Act. 

What does this mean for landlords?

When a tenant makes a formal request for consent to an assignment, landlords must ensure they are not taken to have impliedly (by their conduct) consented to the assignment of the lease. Landlords should:

• promptly acknowledge receipt of the tenant’s request for consent to the assignment; and
• request financial (and other) information relating to the proposed assignee in accordance with the terms of the lease (which, practically speaking, should be done at the same time they acknowledge receipt of the tenant’s request).  

This will equip landlords with all information they require to make a proper and informed decision as to whether they ought to be consenting to the assignment of the lease. However, landlords should note that they should only request information which would have a direct impact on their willingness to provide or withhold their consent. 

Furthermore, landlords must note the importance of ensuring that the tenant is not released on an assignment of the lease. This may also make leased assets more ‘bankable’ and may increase the capital value of landlords’ assets.

Contact us 

If you require any assistance relating to retail and commercial leasing transactions, commercial acquisitions and disposals and other real estate transactions, contact Partner John Frangi on 0417 252 203 or by email . 

1  [2001] NSWSC 1205.  2  Ibid [37].  3  Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406, 543. 4  Ibid.  5  [2015] NSWCA 241. 6  Ibid [27]–[28].  7  Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59 [3].

Bobby Nader

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A lease is an interest in land, therefore any transfer of lease will be dutiable as a transfer of land. If you are a registered self assessor and are dealing with a transfer of lease, you must self assess it in  QRO Online .

Calculating transfer duty on a transfer of lease is done the same way as any other land interest transfer—the rate of duty  will apply to the higher of the consideration (including GST, if applicable) paid for the transfer or the lease’s unencumbered value.

An exemption may apply in certain cases.

Assessing a transfer of lease

A transfer of lease is usually pursuant to a  business contract , so you can stamp it as you would any other pursuant transfer. Find out about  endorsing transactions as a self assessor .

If the transfer is not pursuant to a business contract, you will need to treat it as the primary document for the transaction and assess it in QRO Online.

Here are some tips to help you self assess this type of transaction in QRO Online.

How to lodge online

You must complete all mandatory data fields under each tab in QRO Online. Mandatory fields are marked with a red asterisk. There are some specific data requirements.

• Select  Transfer of non-residential land  as the  Transaction class . You cannot claim a home, first home or first home vacant land concession on non-residential land transactions. If the property is part non-residential and part residential (and a concession is being claimed), you must use the transaction class  Transfer of residential land .
• Agreement to transfer dutiable property —for transactions evidenced by an agreement
• Transfer of dutiable property —for transactions evidenced by a transfer only.
• Select  Land in Queensland  as the  Type of dutiable property .
• Evidence of value is generally not required for transfers of leases where there is nominal consideration.

Records you need to keep

For this type of transaction, you must keep a completed  dutiable transaction statement (Form D2.2) .

Find out more about your  record-keeping obligations .

Section 146 exemption

Section 146 of the  Duties Act 2001  provides an exemption for the acquisition of a new right that is the lease of a dwelling (e.g. in a retirement village) or a site agreement.

Exemptions under section 146 cannot be self assessed. If you believe this exemption applies to a transaction, you must lodge the documents, including a cover letter and  dutiable transaction statement (Form D2.2) , with Queensland Revenue Office for assessment.

Find out more about  lodging documents for assessment .

Also consider…

• Read the  data entry standards for QRO Online .
• Read the  public ruling on dutiable transactions subject to GST (DA011.1) .
• Use the  transfer duty calculator  to work out a transfer duty liability.
• Learn about  self assessing a surrender of lease .
• Get  help with QRO Online .
• View the list of  approved transactions for self assessors .

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• Lease forms under the Retail Shop Leases Act

Form 15 - Assignee disclosure statement to assignor

• Download (305.2 KiB) (PDF)

URL: https://www.publications.qld.gov.au/dataset/0eb3e209-a068-41c9-b2e0-ff2beba1fa3b/resource/70c07b09-0252-467f-ad06-433624d2454d/download/approved-form-15-assignee-disclosure-statement-to-assignor.pdf

This Assignee disclosure statement must be given to the assignor by the assignee before the lessor is asked to consent to the assignment of lease - section 22B Retail Shop Leases Act 1994.

Additional Information

Assignment of Lease - QLD

Modified on: Fri, 21 Jun, 2024 at 12:35 PM

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Table of Contents

Create a qld assignment of lease matter, complete matter details.

1.    Select New Matter  from the triConvey Home Dashboard.

2.    Select State:   QLD .

3.    Select Matter Category:   Leasing .

4.    Select Matter Type:   Assignment of Lease .

5.    Select party:   Assignor ,  Assignee  or Lessor .

Learn more about creating a new matter here .

1.    Double-click Info  and complete required details.  

2.    Enter and complete all parties contact details.  

3.     Double-click  Premises Details  to enter the Address, Premises Details and Title Particulars.    

4.    Double-click  Assignment Details  and enter all relevant details.

5.    Double-click Lease Details  to enter Term Details.

6.    Double-click  Outgoings  to enter all relevant details.  

7.    To add uncommon contacts to your matter , select the  gear  icon.    

8.    From Show/hide details for this matter , select the additional contact/s to be displayed in Matter Details.

9.    Select S ave .

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