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If you wish to leave your commercial lease and have another business take it over, you may want to assign your lease. When assigning or transferring your lease, you must do so correctly and following the terms of your tenancy agreement. If not, you could risk breaching a condition of your lease. This article will detail what assignment is, and outline how you can assign your lease. 

How to Assign a Commercial Lease

When you assign your lease to another business or person (the assignee), you are transferring the assignee:

  • the obligations you had under the tenancy agreement, including the responsibility to pay rent; 
  • the rights you had under the contract, such as the right to exclude others from the property; and
  • the ability to enforce all covenants in the lease. 

Under such an arrangement, the assignee is effectively replacing you as the tenant to that lease. They are not taking on a new lease, but inheriting your original lease. If you wish to remain a tenant whilst renting out your commercial premises, subletting your space may be a more appropriate course of action.  

How Do I Assign a Commercial Lease?

How you assign your lease will depend on what type of lease you have.

Registered Lease

A registered lease is a lease of land that is registered under the land title register. A tenant may register a lease to ensure that they have guaranteed possession of that land.  

If you wish to assign a registered lease, you must do so by getting a ‘transfer of lease’ instrument registered by Land Information New Zealand (LINZ). A lawyer or a conveyancer does this registration. A ‘transfer of lease’ instrument is a written or electronic document that will usually contain:

  • the names of both the new tenant and the individual assigning the lease;
  • the rights and obligations the assignee is inheriting; and 
  • the type of tenancy that is being assigned. 

The property owner, the original tenant who wishes to assign the lease and the assignee must all sign this document. By getting the landlord to sign the document, you are ensuring that you have obtained the landlord’s consent to the assignment. 

The assignee does not acquire all of the tenancy’s rights and obligations until after the ‘transfer of lease’ instrument has been registered. 

Unregistered Lease 

An unregistered lease is an agreement to lease that is not registered under the land title register. 

If you wish to assign an unregistered lease, the most common method is through a deed of assignment. A deed of assignment is a written document that meets specific criteria. A deed of assignment will usually contain:

  • the names of the parties involved;
  • a description of the lease in question, including the length of the lease term;
  • the obligations and rights the assignee is taking on; 
  • the date the assignment takes place; and
  • a clause that indicates the landlord has consented to the assignment.

To be binding, a deed must be executed. Execution takes place when both the landlord and the individual wishing to assign the lease sign it. Someone who is not a party to the deed of assignment must witness these signatures, and provide specific details about themselves. These are the name of the city they live in and their current job description. 

A deed of assignment must also be delivered. A deed will be delivered when it is apparent from the circumstances that the assignee intends to be bound by the deed. A deed will usually be said to be delivered when the assignee starts to pay rent. 

Am I Allowed to Assign My Commercial Lease?

Regardless of how you go about assigning your lease, you must ensure that you can do so. 

Some leases contain a clause that prohibits assignment. However, these are not standard terms in commercial leases. If this is the case, assigning your lease could be grounds for your landlord to cancel your lease or evict you from the property. That is why you must be familiar with your lease’s contents before you engage in an assignment. 

You also will need to acquire consent from your landlord before assigning your lease. They can demonstrate consent through a signature, on either the ‘transfer of lease’ instrument or the deed of assignment. Your landlord cannot unreasonably withhold consent to an assignment. 

Key Takeaways

If you wish to assign a commercial lease, you must do so correctly. When assigning your lease, ensure that you have:

  • read through your lease to see if there is a provision that prohibits assignment;
  • determined whether your lease is registered or unregistered; 
  • (if using a deed of assignment) undergone the correct procedure; and 
  • obtained consent from all parties involved, specifically your landlord. 

If you need any assistance with assigning your commercial lease, LegalVision’s leasing lawyers can help. Contact us by calling 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What does it mean to assign a commercial lease?

When you assign your commercial lease, you transfer all of your rights and obligations under the lease to a new person. 

How do you transfer a business lease?

How you transfer or assign your business lease will depend on the type of lease you have. If it is registered, you must transfer the lease through a registered transfer of lease instrument. If it is not registered, the most common method of transferring is through a deed of assignment.

What is the difference between assignment and transfer of lease?

There is no difference between assignment and transfer of a lease. Both describe the transfer of a tenant’s rights and obligations under their lease to another party.

Can a lease be transferred to another person?

You can transfer a lease to another person if a clause does not prohibit it, and you have the consent of your landlord.

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