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When you are renting out a room in a commercial space, you may not always want to spend the full length of the lease at the property. You may need to move your business to a new premise. Regardless, it can be frustrating to pay for a space that you are not currently using. To avoid this, it is common for people to either sublet or assign their lease. This article will detail the difference between subletting and assigning your lease in New Zealand.

Subletting Your Lease

Subletting is when you, as the tenant of a commercial space, move out of that space and rent it out to someone else for a fixed period. This person or business will be the sublessee or subtenant. Under this agreement, you are now the landlord to the sublessee. 

However, your original lease with the landlord and the obligations you have taken on in that tenancy agreement continue. Your contract with your landlord will oblige you to pay rent on time and look after the house. If your sublessee does not pay rent or damages the property, the landlord can come to you for payment. 

To sublet your lease, you must first get the landlord’s permission. You must look through your lease agreement before subletting your room or space. This is because your agreement may prohibit subleases.

If you do sublet without your landlord’s permission, or despite a clause in your agreement prohibiting subletting, you may be fined or risk eviction.  

Assigning Your Lease

When you assign or transfer your lease to another person or business (the assignee), you are replaced as the tenant. The assignee is taking on your obligations for the duration of the lease term. This includes the responsibility to pay rent and observe all other terms of the lease. However, this new tenant is not entering into a new lease. They are taking on your liability as the tenant under the current lease. 

An assignment can occur through a range of ways, depending on the kind of lease you have. The most common way you can assign your lease is through a deed of assignment. This deed will be a written document containing the assignee’s obligations and the date that the assignment is to occur. From this date onwards, you, as the original tenant, are no longer responsible for the tenancy. However, if you still owe money to the landlord, you must pay this. 

The current landlord, the tenant wishing to assign their lease, the assignee and any other tenants of that property must sign the deed of assignment. The deed will also contain the standard terms of the lease. If you do not get your landlord’s written consent, you cannot assign your lease and responsibilities.

It is best practice to read your lease before assigning it to another person or business, as it may contain a term that prohibits assignment. 

Differences Between Subletting and Assigning Your Lease

1. Your Position When Subletting and Assigning Your Lease

There is a difference between your position after subletting in comparison to after assigning your lease. 

After subletting, you remain as a tenant to the property. This means that you can return to the property once the sublease ends. In conjunction with this, you take on the position as a landlord to the sublessee. On the other hand, after assignment, you are no longer a tenant to that property and are replaced by the assignee. 

2. Your Obligations When Subletting and Assigning Your Lease

Under an assignment, as you have been replaced as a tenant by the assignee, you are no longer required to pay rent or fulfil any other obligations that you had under your lease. These obligations have been assigned to the assignee. 

In contrast, subletting your room or space does not discharge your responsibilities under your lease. Your responsibilities as a tenant, such as keeping the property clean and orderly, continue. You may still be required to pay rent if your sublessee fails to do so, or pay for any damage done to the property by the sublessee. This is why it is essential to make sure you find someone responsible and dependable to sublet your space.  

Key Takeaways

When you sublet your lease, you are renting out your space to another business whilst upholding your responsibilities as a tenant. By entering into a deed of assignment, you transfer the obligations you had under your lease to a new tenant.

Before subletting or assigning your lease, it is vital that you first look through your lease and ensure that no clause would prevent you from doing so. For both residential and commercial leases, it is also crucial for both causes of action to get written consent from your landlord. 

If you need any help with assigning or subletting your lease, contact LegalVision’s tenancy lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What does it mean to assign a lease?

When you assign a lease, you assign your rights and obligations under that lease to another person and their business.

What is the difference between assignment and transfer of lease?

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

What is the difference between an assignment of a lease and a sublease?

Under an assignment, you are transferring your obligations under a lease to a new business. However, when you sublease, you are merely renting out the premises to another business. You still maintain your obligations as a tenant under that lease.

Is a lease assignable?

A lease can be assigned to another business if a clause does not prohibit it, and you have the consent of your landlord.

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