Assignment of Retail Lease in Victoria

How assignment works

An assignment of a retail lease in Victoria transfers the tenant’s lease to someone else, usually the buyer of the business. The buyer takes over the lease for the rest of the term, so a buyer should have the lease reviewed first. Most leases need the landlord’s consent, and the Retail Leases Act 2003 (Vic) sets rules for how that consent is sought and when it can be refused.

When a landlord can refuse consent

Under the Act, a landlord may only withhold consent if:

• the buyer proposes a use the lease doesn’t permit
• the landlord considers the buyer doesn’t have enough financial resources or business experience to meet the lease obligations
• the tenant has not followed the reasonable assignment provisions in the lease
• on the sale of a business, the tenant has not given the buyer the business records for the previous 3 years (or the shorter time it has traded)

The landlord can ask for reasonable information about the buyer, such as financial details and trading history. Giving complete information early usually speeds up the request.

What the outgoing tenant must give the buyer

Before the assignment, the outgoing tenant must give the buyer a copy of the disclosure statement the landlord gave when the lease started. The tenant must also give details of any changes to that information that the tenant knows about, or should reasonably know about.

Where the premises will keep being used for the business, the outgoing tenant must also prepare its own disclosure statement in the prescribed form and give it to the landlord and the buyer.

Release of the tenant and guarantor

Passing on the landlord’s disclosure statement isn’t enough for a release. The release depends on the outgoing tenant’s own disclosure statement. If the outgoing tenant gives that statement to both the landlord and the buyer, and it contains nothing false, misleading or materially incomplete, the outgoing tenant and any guarantors are released from liability under the lease once the assignment takes effect.

If that statement was not given, or was false, misleading or materially incomplete, the release does not apply. That is why the disclosure step matters for sellers.

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