What happens if a lease is assigned without Landlord Consent?

Almost every commercial lease will provide that before a lease can be assigned, the consent of the landlord must be obtained.   If  you have commercial premises associated with your business there are some very good reasons to make sure that the assignment of the lease is properly handled.

We recently acted for a commercial tenant.  This client came to us with a big problem, which had only become obvious to them a year after the date of the sale of their business.

The commercial tenant had sold their business a year earlier and had assigned the lease of the business premises to the buyer.  Things did not go smoothly.

The landlord set out the conditions upon which consent would be given.

Most of the conditions were satisfied but, not all of them.  The landlord had required (as is normal) a deed of consent to assignment.

The seller and the buyer had apparently both signed the deed of consent to assignment and the Deed had been left with the buyer to send back to the Landlord.

The transfer of the lease was also left with the buyer so that the assignment of the lease could be registered at the titles office.  The assignment was not registered.  But the buyer took possession of the premises.

The buyer did not return the Deed of Assignment to the landlord and did not stamp or register the transfer of  lease.

The buyer is now in liquidation.  The landlord claims that consent was never given to the assignment.

The tenant is being sued by the landlord for a very large sum of money.

The moral of the story is that all of the risk is with the seller.  Therefore,  it is the seller that must make sure that they  have a copy of consent  in writing signed by all parties before, the sale proceeds.  The only substitute is a solicitors undertaking.

If the consent is not given the seller has

  1. lost control of the premises and
  2. still has the responsibility to pay all rental and other lease costs.

RIBA Business Lawyers

Strength Through Knowledge

Franchising, Leasing, Acquisitions

Head office:  34 Duporth Avenue, Maroochydore, Sunshine Coast, Queensland.

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