Assigning a lease: when a landlord can refuse

Step 1: Read the assignment clause

Check what the lease says about assignment.

If the lease says the landlord cannot unreasonably refuse consent, that limits the grounds for refusal.

Check what documents the lease requires, and who pays the landlord's costs.

For a lease outside the Retail Leases Act, the lease clause and the general law decide the process. Read it closely.

Step 2: Follow the retail lease process

For a retail shop lease, the NSW Small Business Commission sets out these steps under section 41 of the Act.

1. Get an updated lessor's disclosure statement from the landlord. Ask in writing. If it is not given within 14 days, you may update it yourself, using current outgoings instead of estimates.
2. Give the lessor's disclosure statement to the proposed tenant.
3. Collect the proposed tenant's contact details, proof of financial standing, and business experience.
4. Prepare a short statement comparing the proposed tenant's financial standing and experience with yours.
5. At least seven clear days before the assignment, give your assignor's disclosure statement to the proposed tenant and to the landlord.
6. Ask the landlord in writing to consent to the assignment.

The 28-day response period

The landlord must respond within 28 days of receiving all the required information.

If the landlord does not respond, the assignment may be treated as consented to, provided:

1. You followed the process correctly.
2. The use of the shop is not changing.
3. The proposed tenant's financial standing and experience are similar to yours.

Keep proof of what you delivered and when.

When a landlord can refuse

The landlord does not have to accept a proposed tenant with weaker financial resources or retailing skills than you.

A landlord will also look at whether the new tenant can pay the rent for the rest of the term.

Check the lease. A clause that bars unreasonable refusal narrows the landlord's grounds.

If you believe the landlord has refused without a proper basis, the NSW Civil and Administrative Tribunal can make an order that a landlord cannot withhold consent to an assignment. Mediation with the NSW Small Business Commission usually comes first.

Costs, key money and release

The landlord can charge a reasonable amount for legal and other expenses, but cannot charge a fee just for giving consent.

You can ask for evidence of those expenses, and need not pay until you receive it.

Asking for or accepting key money for consenting to the transfer of a retail shop lease is prohibited.

If you follow the Act's process, you can be released from liability under the lease after the assignment. You will not have to pay amounts the new tenant later fails to pay. Following the process is required for that release.

Common questions