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
- lost control of the premises and
- 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.
Maroochydore: 07 54791488
Brisbane: 31032115
Queensland Law Society Propose Retail Shop Lease Changes
Greater certainty is wanted in relation to retail shop leasing. Changes are sought by Lawyers in relation to certain aspects of the Retail Shop Leases Act 1984 so that both tenants and landlords can operate with greater certainty. The following matters are being suggested as areas in need of improvement :
1. When an office tower forms part of a retail shopping centre there is doubt about when this has the effect of deeming all tenancies to be a retail shop leases. Retail shop lease tenants enjoy legislative benefits and protection that other commercial tenants do not.
2. Unlike residential conveyancing there is no mechanism by which disclosure periods can be shortened. This means that settlements of business sales must sometimes be delayed in order to allow disclosure periods to expire.
3. It is very difficult to comply with the disclosure of outgoings when there is an agreement for lease and no set commencement date.
4. Certain minimum lease standards are unclear including
a. the release of outgoing tenants and guarantors upon an assignment of the lease
b. relocation and demolition requirements
We will keep you informed of developments.
RIBA Business Lawyers
Strength Through Knowledge
Franchising, Leasing, Acquisitions
Head office: 34 Duporth Avenue, Maroochydore, Sunshine Coast, Queensland.
Maroochydore: 07 54791488
Brisbane: 31032115
Tenant Breach may not mean termination!
In our last article we described how it is necessary for a Queensland landlord to issue a form 124 notice before taking any steps to retake possession of premises from a tenant who holds those premises under a Queensland Commercial Lease.
A commercial tenant will always have the right to apply to the courts for something called “relief against forfeiture”. The relief may be given even if the tenant is in default of the lease and even though the lease specifically provides that the landlord has the right to terminate.
Courts have a wide and unfettered discretionary power to take into account all of the circumstances before deciding if the Court will allow a landlord to retake possession from a tenant. Therefore a landlord may not have the ability to terminate a lease even if the tenant is in default.
A tenant cannot claim relief against forfeiture before the landlord has commenced proceedings for possession or has taken possession.
If the tenant anticipates that the landlord is making preparation to take possession then the tenant may apply for an injunction. The tenant may do this once the section 124 notice is served.
So how does the court decide if it will grant this “relief against forfeiture”? Read more
Still liable under lease when business sold?
Do you lease premises for your business? Many business owners do not realize that when they sell their business and assign their lease, they may remain liable to the landlord for many years after the assignment. If the buyer (the new business owner) can’t pay the rent then the landlord may come looking for the previous tenant to cover the loss. Is that you?
Many leases actually provide that an assignment of the lease does not release the previous tenant from liability to the landlord.
Don’t despair! Read to the end of this article where we make reference to some legislation that may assist if you are a retail shop tenant. Read more
Do Contracts Need to be in Writing?
Many people wrongly believe that if an agreement is not put in writing they are not required to honour the agreement. This is incorrect (except for some exceptions, one of which is noted below). A verbal agreement may be enforced by either party to the agreement regardless of whether that agreement is in writing. So be careful what you agree! The difficulty you may have guessed is, proving what was agreed. Indeed we see many agreements, even written agreements that are very unclear. There is sometimes so little detail or, so little care taken, that it is difficult to know what the parties are intending. Read more
Don’t lose your business if the landlord goes Broke!
If you are a business that rents premises then you should urgently have a lawyer check to see if your lease is secure.
In some areas of Queensland small commercial landlords might be under strain and business owners may as a result lose their business. Below we have set out the steps that you can take to make sure that your business is not affected. Unfortunately many leases in Queensland are not protected as Section 66 of the Land Title Act has been ignored or forgotten. If the landlord is put into insolvency or bankruptcy then the commercial tenants may be in serious trouble.
A bank wanting to sell business premises does not necessarily want to keep the business in place, Read more 
Unfair Rent in a Commercial Lease.
A tenant may have no legal right to complain, if a landlord is charging “unfair” rent which is well above the amount that a valuer might say is market rent. The lease determines the rent that is charged. In better times a deal may be struck between the landlord and the tenant. Over time circumstances and the economy may change. Rent is not however determined by the rental market at any particular time. Rental is determined only by the lease. But there may be other things which a tenant can do. Read more
Should a Commercial Lease be Registered?
A dilemma which often faces commercial and retail shop tenants in Queensland is whether or not they should register their Lease with the titles office.
It is common in practice for the Tenant to bear the costs of and incidental to the registration of the Lease. This can include the costs of having a Premises surveyed and plans prepared, lodgement fees and requisitions. This can all be a very costly process.
The question that often confronts a Tenant is: do the risks associated with not registering the Lease justify the initial costs of registration?
So what are the risks? Read more
Lease Negotiations – Some Hints
I attended a seminar held by the Franchise Council yesterday. The speakers were Ralph Edwards and Phillip Chapman of Lease 1. A link to their website is http://www.lease1.com.au/contact.html
There were a number of good points made which have caused me to consider the process of negotiating a lease. We suggest that you always obtain legal advice before proceeding to any negotiation. Here are some suggestions:
1. Pressure on a tenant builds as the date for renewal approaches. Tenants are well advised to Read more
New Disclosure for Retail Shop Leases
Landlords should be aware that new disclosure obligations commenced on 1 January 2011. If you are providing a Disclosure Statement to a tenant or proposed tenant you must make sure that the statement is in the new form.
The 2011 Disclosure Statements for Queensland can be viewed at:
Department of Justice and Attorney-General: http://www.justice.qld.gov.au/justice-services/forms#Retail
If you require any assistance with a commercial or retail shop lease please contact us
