assignment of lease queensland

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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Tenancy agreements

Rental law changes introducing minimum housing standards came into effect for new tenancies (including renewed tenancy agreements) from 1 September 2023, and will come into effect for all remaining tenancies on 1 September 2024.

What is a tenancy agreement?

A tenancy agreement – also known as a lease – is a legally binding contract between a property manager/owner and a tenant/resident.

It outlines each party’s legal rights and responsibilities throughout the duration of the tenancy, including the standard terms set out in the Residential Tenancies and Rooming Accommodation Act 2008 and any additional special terms agreed to by both parties. A tenancy agreement must be:

• documented in writing
• provided by the property manager/owner to the tenant/resident either on, or before, the day the tenant/resident occupies the premises and before any monies are paid
• accompanied by a copy of either the Pocket guide for tenants – houses and units (Form 17a) or Pocket guide for tenants – caravan parks (Form 17b) .

It is an offence not to provide the tenant with a written agreement.

Property managers/owners are responsible for covering the cost of preparing the agreement, which must be written in a clear and precise way.

If a tenant/resident is occupying a premises without a written tenancy agreement, they still have legal protections under Queensland’s tenancy laws and can contact the RTA for support.

Types of tenancy agreements

The Act includes provisions for:

• General tenancy agreements Used when renting a house, unit, apartment, townhouse, houseboat, or secondary dwelling.
• Moveable dwelling agreements Used when renting a caravan, moveable dwelling or site.
• Rooming accommodation agreements Used for boarding houses, supported accommodation services, off-campus student accommodation and other rooming style accommodation.

The Act does not apply to:

• contracts of sale or mortgages if the sale of contract is for 28 days or less
• holiday lettings (e.g. Airbnb)
• rental purchase plan agreements
• temporary refuge accommodation (e.g. a women’s shelter)
• commercial property (e.g. shop leases)
• renting outside of Queensland.

What's included in a tenancy agreement

All tenancy agreements must include:

• the name and address of the property manager/owner and tenant/resident
• the start and end date of the agreement (or state that it is periodic)
• how the tenant should pay rent and how much is to be paid
• contact details for nominated repairers
• standard terms outlined under the Act
• any special terms (these should be agreed in advance, e.g. who is responsible for pool maintenance).

1 September 2023 Rental law changes

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Transfer of lease toolkit

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This toolkit brings together everything you need to know about self assessing duty on the transfer of a lease.

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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• Assignments of lease by a landlord or tenant – cov…

Assignments of lease by a landlord or tenant – covenants that run with the land vs personal covenants

An important matter which needs to be considered when a lease is assigned by either a landlord (selling the land) or tenant, is which lease covenants are enforceable against a purchaser of the land or an assignee of the tenant.

Generally, lease covenants that run with the land will bind a purchaser of the land or an assignee of the tenant, and covenants which are personal in nature will only bind the original landlord and tenant unless expressly assigned.

Covenants that run with the land

A lease covenant will bind a purchaser of the land or an assignee of the tenant if the covenant ‘touches and concerns’ the land.

Although there is no exhaustive test, generally a lease covenant will touch and concern the land if the covenant:

affects the nature, quality, or value of the land, or the mode of using or enjoying the land; and

is not otherwise expressed to be personal.

Some examples of covenants which 'touch and concern' the land are:

Covenants that are personal in nature

A covenant that is personal in nature will only bind the parties who first entered into the obligation, unless expressly assigned.

Side agreements (including incentive deeds) or licences which grant rights separate to the lease, are likely to be considered as personal and only bind the original landlord and tenant.

Some examples of lease covenants which have been held not to touch and concern the land are:

landlord’s covenant to sell its interest in the land

landlord’s covenant to purchase tenant's fixtures

landlord’s obligation to return the tenant’s security deposit at the expiration of the lease

tenant’s option to purchase the land

Each case will need to be considered depending on the particular facts and the legislation applying in the relevant state.

Assignments of lease by tenants

Most leases require tenants to obtain the prior consent of the landlord and enter into a deed of consent to assignment of lease (under which the tenant assigns its lease covenants to the assignee), before assigning a lease.

In such cases, all the lease covenants are expressly assigned to, and enforceable against, an assignee.

Assignments of lease by landlords

In contrast, leases do not usually contain any restriction on landlords selling the land or any obligation regarding assigning the lease covenants to a purchaser. Unless expressly assigned, only covenants that run with the land are enforceable against a purchaser of the land.

Recommendations

In order to avoid any uncertainty as to which covenants will bind a purchaser of the land or an assignee of the tenant, leases and side agreements should be carefully drafted.

If the parties intend for personal covenants to also bind a purchaser of the land or an assignee of the tenant, an obligation must be imposed on the assignor to ensure that the purchaser/assignee and subsequent purchasers/assignees enter into a deed with the remaining party, agreeing to be bound by and perform all relevant covenants.

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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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Lease Assignments in Queensland: Transferring from the Business Owner to the Buyer

Are you selling a business or leased premises? Or struggling with the written assignment? 

In this video John Gallagher navigates the legal intricacies surrounding the assignments of commercial leases in Queensland, providing valuable insights for business owners, landlords, and potential assignees alike.

There are many intricacies of assigning a lease of real estate in Queensland, including the significance of obtaining the landlord's written consent when selling a business conducted from leased premises. The lease included when transferring business real estate will often require you to satisfy the landlord of the assignee's capacity to operate the business.

While a landlord cannot unreasonably withhold consent, the tenant must typically demonstrate the proposed assignee's business experience and financial capacity to operate the business as part of the lease assignment process. 

Landlord's Consent and Its Implications

The landlord's consent is commonly formalised through a deed, including a covenant from the assignee to adhere to the lease terms. 

Crucially, obtaining consent does not automatically release the outgoing tenant from ongoing liability unless explicitly agreed upon by the landlord within the lease assignment. 

In cases where the new tenant defaults after the business sale, the outgoing tenant can still be held responsible for lease breaches.  

Exception for Leases Regulated by the Retail Shop Leases Act

A notable exception is outlined for leases entered after 2016, regulated by the Retail Shop Leases Act . In such cases, the outgoing tenant is automatically released from liability, provided specific disclosure requirements under the Act are met. 

It is paramount that stakeholders be mindful of these disclosure requirements and seek legal advice to ensure compliance and avoid potential pitfalls during the lease assignment process. 

For legal advice regarding commercial or retail leasing , please don’t hesitate to contact the Argon Law team , and visit our website for a series of informative articles and videos.

More Information

• Retail Shop Leases
• Guide to Leasing | For the Commercial Landlord

Related videos as per area of practice:

Commercial and business law.

Assignor disclosure statement: Form 9 (Qld)

Practical law anz standard document w-014-8537  (approx. 4 pages), about this document.

• The day the assignee enters into an agreement to purchase the assignor's business carried on from the premises.
• The date the lessor is asked to consent to the assignment.
• Lessor disclosure statement: Form 7 (Qld) .
• Assignor disclosure statement to lessor: Form 15 (Qld) .
• Assignee disclosure statement to lessor: Form 16 (Qld) .
• Form 9 - Assignor disclosure statement (Word format) .
• Form 9 - Assignor disclosure statement (PDF format) .

This resource is continually monitored and revised for any necessary changes due to legal, market, or practice developments. Any significant developments affecting this resource will be described below.

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Transferring a lease or licence

• Transferring a lease or licence when approval to transfer is required

If you are not exempt from needing approval , you will have to:

• ensure outstanding rents and penalty interest has been paid
• apply for our approval for the transfer
• lodge your forms with the Titles Queensland, once we have approved the transfer.

We strongly encourage you to arrange a pre-lodgement meeting with us before you apply. This can help to ensure you have the information you need to apply correctly. Contact your nearest business centre to organise a meeting.

Obtaining a rental clearance report

When you apply for our approval, we will need evidence that the current leaseholder or licence holder has paid any outstanding rent (including deferred rent) or penalty interest.

Important: When a lease or licence is transferred, any liabilities, including any outstanding rent and interest, become the responsibility of the incoming leaseholder or licence holder.

You can get this evidence, along with information about how much rent may be outstanding, by requesting a rental clearance report. If you are the current leaseholder or licence holder, simply email [email protected] .

If you are the purchaser or an agent acting for one of the parties, you can obtain a report by emailing [email protected] as long as you can provide either a:

• copy of the contract of sale
• letter of authority from the current leaseholder or licence holder.

Associated licences or permits

If you are transferring a lease and an associated road licence and there is no covenant that ties the 2 parcels, please contact us to discuss requirements. You can email [email protected] or call (07) 4447 9174.

Permits to occupy can’t be transferred. If you are transferring a lease and have an associated permit to occupy, you should surrender the permit when the lease is transferred. The incoming leaseholder can then apply for a permit if required.

How to apply

The application can be submitted by the current or incoming leaseholder or licence holder or an agent acting on their behalf.

If anyone other than the current leaseholder or licence holder submits the application, then they will need to include the written approval of the current leaseholder or licence holder with the application.

Your application should include:

• Part A - Contact and land details - you can apply and lodge online via Part A – Contact and Land details or apply via Form LA00—Contact and land details (PDF, 293.6 KB)
• LA04 – Application for approval to transfer (PDF, 382.3 KB)
• Application fee
• Evidence that all outstanding rent has been paid
• Current leaseholder’s written authorisation, if applicable
• Statutory declaration about previous approval to transfer (if applicable, see below)
• Any additional attachments, as requested

To avoid processing delays, read the forms carefully and include all required information.

Prior approvals to transfer

If we previously granted an approval to transfer, but the transfer wasn’t registered or lapsed, your application should include a statutory declaration from the leaseholder or licence holder or advice from their legal representative explaining that the transfer did not proceed.

Existing applications over the lease

If you have already lodged an application relating to the lease or licence, please tell us in writing at the time you apply to transfer the lease or licence.

Lodging your application

You can lodge your application online through the Part A – Contact and Land details online form.

If you can't lodge your application online, apply through the PDF applications and lodge by emailing [email protected] or by posting it to Department of Resources, PO Box 5318, Townsville QLD 4810.

Payment options

If a fee applies to your application, payment options are cheque (by post) or credit card.

Cheques should be made out to the 'Department of Resources' and marked 'not negotiable'.

Credit card payments are accepted over the phone.

We will send you a receipt once we have established that:

• your application meets all requirements
• .you've accurately completed all parts of the application form.

If you have any questions about lodging your application or payment, contact us by:

• email at [email protected]
• phone on (07) 4447 9174

How your application is assessed

We will assess your application against legislative requirements. We will seek the views of other stakeholders (e.g. state, regional and local agencies) and inspect the land if required.

Policies and legislation

• Land Act 1994
• Foreign Ownership of Land Register Act 1988
• Transfer of leases, licences and subleases policy (PDF, 584KB)

Lodging your forms with Titles Queensland

If your application is approved, we will send you a Form 18 – General consent. Any additional conditions will be attached on a Form 20 – Enlarged panel .

To complete the transfer, you must lodge the following information with Titles Queensland .

This must be done within 6 months of the approval date or the approval will lapse.

You must submit:

• Form 1 – Transfer
• Form 18 – General consent
• Form 20 – Enlarged panel
• Form 24 – Property information (transfer)
• rental clearance report showing that all outstanding rental has been paid
• the condition of the land
• the level of compliance with the conditions of the lease
• any current arrangements under other legislation
• the annual rent and when it is payable.
• other information as required.

Foreign ownership requirements

The incoming leaseholder needs to be aware of the requirements of the Foreign Ownership of Land Register Act 1988.

This requires that a foreign person (as defined in the Act) who is purchasing a lease, or their trustee, lodge a Form 25 – Foreign ownership information for each interest acquired.

Hardship assistance

Hardship concessions and deferral of rent or instalments are not automatically passed on when a lease or licence is transferred. If the incoming leaseholder or licensee is suffering hardship, they may be eligible to apply for deferral of rent or instalments . If the lease is for residential purposes, they may also be eligible for a reduction of rent .

In this guide:

• Exemptions from needing our approval for a transfer
• Lease transfers for exempt leases or licence transfer
• Information for mortgagees and receivers
• Extending a rolling term lease

Print entire guide

• Previous ( https://www.qld.gov.au/environment/land/state/leases/transferring/obtaining-consent )
• Next ( https://www.qld.gov.au/environment/land/state/leases/transferring/mortgagees-receivers )

Buying a Business: What To Know About Lease Assignment

By Vee Naidoo

Updated on October 26, 2018 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

How are Leases Assigned?

When can a landlord refuse an assignment, key takeaways.

It’s easy to overlook assignment of the lease when buying a business. Business owners mistakenly assume that if the business is changing hands, so to will the lease agreement. This is not, however, the case.

A lease assignment is a process where one business transfers its existing lease to another. The existing tenant must obtain consent from the landlord. This is a formal process, and the landlord can refuse to provide consent in certain situations.

If you are purchasing a business, it’s important to secure the assignment of the lease to avoid uncertainty about the location from which you will operate. After all, no new business owner wants to find themselves in a position where they have to deal with unexpected relocation costs.

This article will explain the importance of securing a lease assignment when purchasing a new business, focusing on the assignment process for retail leases.

State-based legislation governs the process to assign retail leases. Generally, the existing tenant will make an application in writing to the landlord to assign the lease. The landlord will then respond to the request within a specific timeframe. In some states, like NSW, if the landlord fails to respond within a 28 day period, it is automatically taken that the landlord has approved the assignment.

On the other hand, in other jurisdictions such as Queensland, if the landlord fails to respond with a one-month timeframe, a ‘retail tenancy dispute’ will arise. This dispute is then referred to the Queensland Civil and Administrative Appeal Tribunal.

In most states, retail lease legislation protects tenants and prospective purchasers by prohibiting landlords from unreasonably withholding consent to a lease assignment.

Under most retail legislation, a landlord cannot unreasonably refuse consent. Securing an assignment of the lease when purchasing a business may then seem less crucial.

Purchasers should know the ‘reasonable’ grounds on which a landlord can refuse an assignment. We set these out in the table below.

Purchasers should secure an assignment of the lease to ensure the stability of the business’ operations. Generally, landlords cannot refuse consent to an assignment unless it is on reasonable grounds as permitted by the relevant retail legislation and lease terms. It’s important you have a commercial leasing lawyer review the lease to ensure you understand any restrictions placed on the assignment that may affect your decision to purchase the business. If you have any questions, get in touch on 1300 544 755.

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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

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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I have A Queensland Retail Shop Lease – What are my Legal Protections?

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The Retail Shop Leases Act (“the Act”) sets mandatory minimum standards for retail shop leases in Queensland and offers tenants more protection than standard commercial leases.

Refer to our recent article “ How Do I Know if the Retail Shop Leases Act Applies to My Shop? ” which discusses what leases the Act applies to.

The protections under the Act can’t be contracted out of in the lease (and if there is any inconsistency between the terms of the lease and the Act, the terms of the Act will prevail) and are designed to give the tenant detailed disclosure before it enters into a lease and provide it with additional protections in relation to a number of key leasing issues.

Below is a brief summary of a number of these protective provisions for the tenant.

The Act requires the landlord to provide the tenant with various disclosures in relation to different lease situations (unless the lease is a periodic tenancy or a tenancy at will) so that it can consider this additional information before it commits to the lease. A tenant should of course also obtain legal advice in relation to the terms of the lease before committing to it.

For example, the landlord must provide the tenant with:

• for a new retail shop lease – a draft of the lease and a disclosure statement at least 7 days before the tenant enters into the lease; and
• for any renewal of the lease due to the exercise of an option – a current disclosure statement within 7 days of it receiving the tenant’s notice exercising the option.

If the landlord does not provide this disclosure (or gives a defective disclosure statement), the tenant can terminate the lease within the first 6 months after entering into it (and the landlord has to pay the tenant reasonable compensation for any loss or damage it suffered because of the non-compliance).

The Act also allows the tenant to give the landlord written notice, within 14 days of it receiving the renewal disclosure referred to above, that the exercise of the option is withdrawn (even if the renewed lease period has commenced).

The Act also provides that any proposed assignee of a retail shop lease:

• must be provided with a copy of the current lease and a disclosure statement by the current tenant at least 7 days before the landlord is asked to consent to the assignment of the lease (or, if the assignment is associated with the purchase of the business operated from the premises, the date the assignee enters into the business purchase contract); and
• must be provided with a disclosure statement and  copy of the lease by the landlord at least 7 days before the lease is assigned.

If either of the landlord or the assignor doesn’t provide this disclosure, the assignee can apply to the Tribunal for an order requiring that it be provided to you.

Special disclosure obligations also apply if the tenant is licencing the premises from a franchisor (who is the tenant under a retail shop lease).

We also note in passing that the Act also places an obligation on the tenant and assignee to provide certain disclosure and financial and legal advice reports to the landlord and assignor.

Although standard commercial leases allow the landlord and tenant to commercially negotiate what outgoings the tenant must pay, the Act places a number of restrictions on what outgoings are payable and obligations on the landlord in relation to its recovery of outgoings.

Under the Act:

• The landlord can only recover outgoings that are:
• its reasonable expenses directly attributable to the operation, maintenance and repair of the centre; and
• charges, levies, premiums, rates or taxes payable by the landlord because it owns the centre,

and it specifically provides that outgoings can’t include a number of items – including land tax.

(2)       A tenant is not required to pay any outgoings unless the lease specifies the outgoings that are payable, how they will be determined and apportioned to the tenant and how they may be recovered from the tenant.

(3)       The percentage of outgoings payable by the tenant can not be more than the proportion that their leased area bears to the total of all leased or occupied (or available for lease or occupancy) areas owned by the landlord in the centre.

(4)       The Landlord must provide the tenant with an annual:

• estimate (in the approved form and meeting the obligations of the Act) of the outgoings and the proportion of them that the tenant will be liable for; and
• audited statement of outgoings prepared by a registered auditor (in the approved form and meeting the obligations of the Act) within 3 months of the end of each period.

If the landlord does not provide these, the tenant can withhold payments for apportionable outgoings until they are given.

• Restrictions on Tenant’s Obligations to Make Payments

The Act also restricts the other costs that can be passed on to the tenant – including legal fees (which are usually payable by the tenant in a standard commercial lease).

The Act specifically provides that a tenant under a retail shop lease is not liable to pay any amount for the landlord’s costs in:

• preparing, renewing or extending the lease;
• obtaining its mortgagee’s consent to the lease; or
• complying with the Act.

Further, a retail shop lease can not require the tenant to make any payments other than:

• rent (noting that  up to one month’s rent in advance is allowable);
• outgoings (if  specified in the lease);
• damages for any breach of lease (if  specified in the lease);
• an indemnity to the landlord for any loss or damage it suffers as a result of any actions or omissions by the tenant;
• interest on arrears of rent and outgoings (so long as the rate and calculation method is detailed in the lease);
• the landlord’s reasonable legal or other expenses incurred in responding to any request by the tenant to vary the lease or for its consent for a sublease or licence;
• half of the costs of any valuer retained to determine market rent;
• the landlord’s costs in investigating any proposed assignee, obtaining its consent and the reasonable costs of the assignment;
• a repayable bond;
• mounts spent by the landlord for fitting out the leased premises;
• Payments to a sinking fund;
• Payments for promotion and advertising of the retail shopping centre; and
• surveyors and registration fees to register the lease.

The Act also prohibits the landlord from seeking or accepting payment of any key money or any amount for the goodwill of the tenant’s business operated on the premises (noting a penalty applies if it does).

Under relatively new amendments to the Act, the proposed landlord can now however recover its reasonable legal and other expenses incurred in preparing a lease if:

• the tenant agreed on the terms of the proposed lease with the landlord;
• the tenant have the landlord a written notice to prepare a final lease (and it is prepared);
• the tenant didn’t sign the lease; and
• the landlord provides the tenant with a copy of its invoice for the costs incurred in preparing the lease.
• Rent Reviews

Again, rent review is a commercial matter negotiated between the parties in a standard commercial lease and leases often provide that the rent is to be calculated on the better of two basis (e.g. the higher of CPI and 4%) and can’t decrease in any year (e.g. the rent remains the same if a market review would result in a decrease).

The Act however provides that a retail shop lease:

• can’t allow for rent review more than once every year (except for in the first year of the lease);
• can only allow for each review to be made on 1 basis (although different basis can be used during the term) – noting that the Act lists the allowable bases (which includes, among other things, fixed, CPI and market review); and
• must not include any ratchet provisions.

The Act also provides that if the current market rent can not be agreed by the parties, an independent specialist retail valuer must be appointed, at the equal cost of the parties, to determine it. The Act contains a number of provisions in relation to how the market rent is to be calculated and timeframes in that regard. Any clause of the lease that requires the determination to be made other than in accordance with the Act is void (to the extent that it does so).

• Options to Renew

The Act also contains a number of protections (in addition to the disclosure discussed above) in relation to the exercise of any option.

Given the implications to the tenant’s business of losing its premises, the Act provides that at least two months (but not more than 6 months) before the date the tenant must exercise its option, the landlord must give the tenant written notice of the option date.

The Act also provides that if the lease does not contain any provision for an option, the landlord must give the tenant written notice (at least six months before, but no more than a year before, the end of the term – noting however that a shorter period applies for leases with a term of less than a year):

• offering the tenant a renewal or extension of the lease (and detailing the terms of the offer) – this offer can’t be revoked for one month after it is made or if the tenant accepts it; or
• advising it that it does not intend to offer it a renewal or extension.

If the landlord does not give this notice and the tenant gives notice before the expiry of the term asking for an extension, the term of the lease is extended until six months after the landlord gives the notice (although the tenant may terminate the lease before this extended term ends on one month’s written notice).

If the rent for the renewed term is to be reviewed to market, the tenant can give the landlord notice (during the period commencing 6 months before the expiry of the current term and ending 3 months before its expiry – noting this period is different for leases under 1 year) requiring the market rent to be determined.  The Act also provides that despite any other provision of the lease, the last day which the tenant can exercise the option is 21 days after it receives written notice of the current market rent.

• Compensation

Under the Act the landlord has to pay the tenant reasonable compensation for any loss it suffers because the landlord (unless it is due to an emergency or required by law):

• substantially restricts the tenant’s access to the premises;
• takes action that substantially restricts or alters access by customers or the flow of potential customers past the premises;
• causes significant disruption to the tenant’s trading from the premises (or doesn’t take reasonable steps to stop any disruption within its control);
• doesn’t rectify, as soon as is practicable, any breakdown of plant or equipment that the landlord is responsible to maintain or any defect (that wasn’t reasonably apparent when the tenant entered into the lease) in the centre/building that the premises are located it;
• doesn’t undertake any cleaning, maintenance or repainting the centre/building that the premises is located in that the landlord is responsible for under the lease; or
• causes the tenant to vacate the premises before the end of the term because of any refurbishment or demolition of the centre/building where the premises are located.

The landlord must also pay reasonable compensation for any damage the tenant suffers because:

• it entered into the lease (including any renewal and assignment) based on any false or misleading statement or misrepresentation made by the landlord; or
• the premises was not available for trading by the date stated in the disclosure statement due to default by the landlord.

These provisions however do not apply to periodic tenancies or tenancies at will (unless they arise from holding over provisions).

• Relocation and Demolition

If a lease allows the landlord to relocate the tenant’s business or terminate the lease due to demolition of the premises, the landlord must adhere to the procedures and compensation provisions under the Act.

If the landlord wishes to relocate the tenant’s business it must give the tenant written notice:

• giving sufficient details of the proposed refurbishment, redevelopment or extension to indicate a genuine proposal that is to be carried out within a reasonably practicable time after the relocation and is not practically possible without vacant possession of the premises;
• that details a reasonably comparable alternative premises (in the centre if the current premises is located in a retail shopping centre) that will be made available to the tenant; and
• detailing the date the tenant must vacate – which has to be at least three months after the notice is given.

A tenant can terminate the lease within one month of receiving the notice if it does not wish to relocate (noting that if it doesn’t terminate in this time, it is taken to have accepted the offer contained in the landlord’s notice).

Any new lease of the relocated premises will be the same as the original lease except that:

• the term of the new lease will be the same as the remaining term of the original lease; and
• the rent for the new lease will be adjusted to take into account the difference in the commercial values of the premises (if necessary).

If the landlord relocates the tenant, it must pay the tenant’s reasonable costs of relocation including (but not limited to):

• the costs of dismantling and reinstalling fixtures and fittings and modifying or replacing fixtures and fittings to the standard immediately before the relocation; and
• its legal costs.

If the landlord wishes to terminate the lease under any demolition provision it must give the tenant written notice:

• giving sufficient details of the proposed demolition to indicate a genuine proposal to demolish the building within a reasonably practicable time after the lease is terminated; and
• detailing the date the lease terminates – which has to be at least six months after the notice is given.

The tenant can terminate the lease before the termination date by giving the landlord at least one months written notice.

If the landlord gives a demolition notice it must pay the tenant reasonable compensation for the loss and damage the tenant suffers:

• because of the early termination of the lease, if the demolition is not carried out, or is not carried out within a reasonable time after the termination (unless the landlord can prove that at the date the termination notice was given it did have a genuine proposal to demolish within a reasonably practicable time); and
• for the fitout of the premises (to the extent it was not carried out by the landlord), whether or not the demolition is actually carried out.
• Release of Guarantee

In standard commercial leases, as a condition to consenting to any assignment of the lease, the landlord will often insist that the outgoing tenant (assignor), and their guarantors, remain liable if the new tenant (assignee) defaults under the lease after the assignment.

The Act however protects the assignor and its guarantors in this regard and provides that so long as the assignor has complied with all of its disclosure obligations under the Act (and the disclosure is not defective), it, and its guarantors, are released from any liability under the lease resulting from a default by the assignee once the assignment is entered into.

• Dispute Resolution

The Act also includes a low cost, streamlined dispute resolution process – providing firstly for non-compulsory mediation and if the matter is not resolved at the mediation, referring the dispute to the Queensland Civil and Administrative Tribunal for determination.

Refer to our article “ Resolving a Retail Shop Leasing Dispute in Queensland ” for more detailed information in relation to this process.

Note also that any provision under a lease requiring a dispute to be referred to arbitration or to be heard by a court or tribunal does not limit the party’s rights under the above provisions.

• Miscellaneous Provisions

The Act also places a number of restrictions and obligations on the landlord in relation to:

• calculation of turnover rent (and confidentiality of information provided for that calculation);
• collection and use of sinking fund fees and promotion and advertising levies;
• unconscionable conduct;
• the tenant’s right to join or form commercial associations;
• retail trading hours; and
• refurbishment and refitting.

The above is by no means an exhaustive summary of the provisions, protections and obligations under the Act. It is important that landlords understand their obligations under the Act and tenants understand the protections that are provided to them and we invite you to contact our office if you have any queries in relation to, or are experiencing any difficulties with, your retail shop lease.

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Assignment of lease

ADIS Code -  LASS

An assignment of lease, including a sub-lease, is a transfer of the lease by the lessee, ie the assignor, to a new lessee, ie the assignee. The lessor is usually not a party to the assignment.

The affected lease or sub-lease is not required. For an assignment of a lease affecting Kosciuszko National Park .

Lodgment requirements

Stamp duty -  Required. If not marked Registration insisted upon , is prohibited.

Any alteration to the term or rent must be marked.

Registration copy - Required. If unacceptable, Registration insisted upon  is prohibited.

Statement of Title Particulars form  - Not required.

NOS form  - Not required.

Index Particulars form (completion)

(A) Lodging Party - Must be completed.

(B) Instrument - Lease - Assignment of

(C) Locality -  Not required.

Link Conveyance - Not required.

Principal Deed - The registered affected lease or sub-lease.

(D) Indexing -  The assignor and the assignee, and the sub-lessor for an assignment of a sub-lease.

(E) Certification -  Required.

Document requirements 

Date: must be dated with the date of execution. If not dated advise the lodging party. If a date is not furnished, indicate Registration insisted upon  and include the reason.

Name: the full names (initials are acceptable) of the assignor and the assignee are required. Advise the lodging party of any discrepancies in names.

Operative clause: "... hereby assigns...".

Principal Deed: the number of the affected lease or sub-lease as stated in the assignment must be identical to the number stated on the IPF. If affecting a sub-lease, the head lease number is also required.

Execution: by the assignor. A power of attorney must be registered, The assignee does not have to sign.

Attestation: required. Must be witnessed by a person of 18 years of age or older who is not a party to the document.

IPF: must be completed.

Staff processing information

A Deeds search may be made for the head lease number.

CA Not required

Locality: nil.

Link Conveyance: nil.

Principal Deed: required. The registered number of the lease or sub-lease being assigned, and the registered number of the head lease for an assignment of a sub-lease.

Noting: "Affecting [description of the land]".

If the assignment affects:

• an interest, state: "interest in" (or Noting Code: "I"
• a share, state: "[fraction] share"
• part of the land, state: "[affected land description]"
• the land description relies on an attached plan, state: "see attached plan" (or Noting Code: "PL").

V: the assignor, and the sub-lessor for an assignment of a sub-lease, deceased estates or trusts, and any variations thereof.

P: the assignee, deceased estates or trusts, and any variations thereof.

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