If you are thinking of selling your business and assigning your
premises lease, or moving your business to new premises, you may
need to assign your lease (assuming that the lease does not
Normally, you will need your landlord's consent to the
assignment. Before consenting to the assignment, your landlord must
be satisfied that the new tenant is able make rental payments and
run a successful business. Accordingly, the new tenant will need to
provide information which clearly details work/industry experience
and financial statements showing assets and liabilities.
When a lease is assigned, you, as the original tenant, are still
contracted to the landlord and remain liable for the lease
obligations to the date that the term of the lease expires. This
rule applies to guarantors as well. Unless the lease document
states otherwise, your liability as tenant and guarantor continues
until the term ends.
What can you do to ensure you are 'off the hook?'
- For your liability under the existing lease to come to an end,
you will need to negotiate with your landlord to release you from
any ongoing liability (and the guarantor, if applicable) after the
- If the landlord will not release you, then you should try to
negotiate a cap on liability, particularly if the remaining term of
the lease is lengthy.
- Don't ignore the information that you are providing to the
landlord to prove the new tenant's financial suitability. This
information should be as important to you as it is to the Landlord.
If the new tenant and guarantor does not have suitable experience
or financial backing, assess the probability that the landlord may
call on you to pay the rent at some stage in the future when the
new tenant stops paying. Do credit checks on the new tenant and
- If your landlord does not release you from ongoing liability,
you should, as a minimum, ensure that the new tenant indemnifies
you for any breaches of the lease.
The best negotiations are the ones you have before signing
documents! Leases can be complex contracts and it pays to do your
homework before signing them, especially on matters that have or
could have a financial impact in the future.