Friday, 12 February 2010

How To Transfer or Assign a Retail Lease To Someone Else


How to assign or transfer a retail lease.

If you are the tenant under a retail lease and come to the point where you no longer wish to use the property, what are your options? Unfortunately you are still obligated to honour your commitment under the terms of the lease, meaning you must continue to pay the rent and maintain the property while your name remains as the lessee.

One way of removing your name from that lease is to transfer the lease to another person or ‘party’. This is called an ‘assignment of retail lease’ and can be done using a simple written contract, known as an ‘assignment of retail lease agreement’. A transfer of retail lease, or, retail lease assignment is a simple contract entered between you (the lessee and assignor) and another party (the assignee), whereby they accept responsibility for all of your lease obligations beyond the date specified in the lease terms. To put it simply, it’s a way to get someone else to take your place in the lease, with the new party assuming all the responsibilities under the original lease. It is the only way to change the name of the original lessee on the rental agreement.

Subletting the rented premises may be an option. Assigning a retail lease is similar to subletting the premises with one major difference. When you sublet all or part of the premises to another person you are still obliged to honour your obligations to the property owner under the lease contract. Under an Assignment of lease agreement, the new tenant agrees to assume all those rights and obligations on your behalf and indemnifies you against any further obligation to the Landlord.

There are no rules stating when you can assign a retail lease so you can feasibly use a retail lease assignment agreement whenever you are leasing retail property. Although you will have to first get permission from the landlord (lessor) before entering into this agreement.

When Requesting the landlord’s ‘consent to assignment’ there are certain rules may vary slightly from state to state but the basics are:

  • A request for the landlord’s/lessor’s consent to an assignment of the lease must be made in writing
  • The lessee must provide the lessor with such information as the lessor may reasonably require concerning the financial standing and business experience of the proposed assignee.
  • Before requesting the consent of the lessor to a proposed assignment of the lease, the lessee must supply the proposed assignee with a copy of any disclosure statement given to the lessee in respect of the lease, together with details of any changes that have occurred in respect of the information contained in that disclosure statement since it was given to the lessee (including any changes made since the rental term started).
  • The tenant must provide the landlord with such information as the landlord reasonably requires about the financial resources and business experience of the proposed assignee.

The landlord has the right to withhold consent under certain circumstances.

  • The proposed assignee proposes to use the retail premises in a way that is not permitted under the lease;
  • The landlord considers that the proposed assignee does not have sufficient financial resources or business experience to meet the obligations under the lease;
  • The proposed assignor has not complied with reasonable assignment provisions of the lease;
  • The assignment is in connection with a lease of retail premises that will continue to be used for the carrying on of an ongoing business and the proposed assignor has not provided the proposed assignee with business records for the previous 3 years or such shorter period as the proposed assignor has carried on business at the retail premises.

Before you start any of these proceedings you will need to know the terms of the original lease, including the length of the lease, any legal regulations regarding retail assignment and the new terms. As with any business agreement, to ensure there are no misunderstandings, you are best advised to have your assignment of retail lease agreement in writing.

The agreement should refer to the terms of the original lease, as well as state what each party will or will not be responsible for under the terms of the assignment. You’ll also want to make sure each party reads the assignment, completely understands their obligations and then signs it. Assigning retail leases to other people can be a very effective tool in the right situation.

Whether you want to relocate your business, travel the world, or simply don’t want the responsibility under the lease any longer, you can use retail lease assignments to your benefit. A well-crafted Assignment of Retail Lease Agreement
will spell out the duties and responsibilities of each party and shield you from potential liability. For More Information Click Here

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