TRANSFER OF LEASE AGREEMENT
How to transfer a commercial lease to someone else.
When you are selling a business you may be in a situation where a business premises is already under a lease agreement. If the premises is part of the business sale then it will need to transferred (assigned) to the new owner as part of the sale of business agreement. To do this you will need to use a transfer of lease agreement.
A transfer of lease, although similar to a subletting the property, is a simple contract you can enter with someone else so they accept responsibility for your lease obligations. However before you do, there are a few things you should know;
WHAT IS A LEASE TRANSFER?
A lease transfer (or lease assignment) is an agreement where the current lessee (the person responsible for fulfilling the lease obligations) enters into a contract with a new party “called the assignee”. The assignee essentially agrees to take over the obligations and responsibilities of the original tenant under the original lease. To put it simply, it’s a way to get someone else to take your place in the lease, with the new party taking on all the duties under the original lease.
WHEN CAN I USE A LEASE TRANSFER AGREEMENT?
You can feasibly use a lease assignment whenever you are leasing a property. Be it an assignment of a real estate lease,an automobile lease or anything else, you can generally assign the rights and duties under the lease to a third party in almost any circumstance. You may or may not have to first get the lessor’s permission before entering into an assignment of lease agreement, but that depends upon the terms of the underlying lease.
WHAT IS THE DIFFERENCE BETWEEN SUBLETTING AND TRANSFERRING A LEASE?
When you sublet all or part of the premises to another tenant you are still obliged to honour your obligations under your lease contract with the owner of the property. If you choose to Assign all your rights and obligations under the lease to another party, you would use a transfer of lease agreement. Under a transfer 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 property owner.
HOW DO I ENTER INTO A TRANSFER OF LEASE AGREEMENT?
As with any business agreement, to ensure there are no misunderstandings, you are best advised to have your transfer of 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. For example, you may enter into contract of assignment where by the new party “the assignee” agrees to do everything required by the tenant under the original lease, except pay the rent. The original tenant “the assignor” might agree to pay the rent and accept a smaller (or even larger) payment from the assignee.
WHAT DO I NEED TO KNOW BEFORE I ENTER INTO A TRANSFER OF LEASE AGREEMENT?
At a minimum, you’ll need to know the terms of the original lease, including the length of the lease, any legal regulations regarding the assignment and the new terms. You’ll also want to make sure each party reads the Transfer, completely understands their obligations and signs it.
Assigning real-estate or property leases to other people can be a very effective tool in the right situation. It is particularly effective in a sale of busines situation where you can use a lease transfer to your benefit. A well-crafted transfer of lease agreement will spell out each parties duties and protect you from potential liability.
Transfer of Lease Agreement
