Assignment Of A Lease

Changes Under The Retail Shop Leases Act

Are you fully aware of your disclosure obligations under the Retail Shop Leases Act 1994?

If you are buying or selling a retail business with a lease, or if you are a landlord involved in such a transaction, it’s important that you are aware of your disclosure responsibilities under the Retail Shop Leases Act 1994 (the Act). There have been recent changes to the Act so even if you are familiar, this article is a good opportunity to refresh your knowledge.

As a starting point, it may be helpful to review the meaning of some terms under the Act.

• Assignor: A tenant who transfers their lease to someone else, e.g. when selling a business.
• Assignee: A prospective tenant who takes over an existing lease from an existing tenant, e.g. when buying a business.
• Lessor or Landlord: The owner of the leased premises.

Assignor Disclosure Obligations

When the lease assignment is in connection with the sale of a retail business by the assignor to the assignee, the assignor must give the assignee an assignor disclosure statement as well as a copy of the current lease at least 7 days before the earlier of:

1. The day on which the assignee enters into the business sale contract; or
2. The day the lessor is asked to consent to the assignment.

Please be aware that this is a recent change to the legislation. Previously the requirement was to provide the assignor disclosure statement 7 days before the lessor was asked to consent to the assignment.

It is now possible for the assignee to waive the 7 day period with a waiver notice, provided they have already been given a copy of the assignor disclosure statement and a copy of the current lease

The assignor must also give the lessor a copy of the assignor disclosure statement given to the assignee on the day the lessor is asked to consent to the assignment. The lessor must respond to the request for the assignment of the lease within one month and failure to do so will result in the assignor having the right to bring a retail tenancy dispute before the Queensland Civil and Administrative Tribunal (QCAT).

Assignee Disclosure Obligations

The prospective assignee must give an assignee disclosure statement to the assignor before the lessor is asked to consent to the assignment.

The prospective assignee must also give an assignee disclosure statement to the lessor before the assignment is entered into.

For the purposes of the Act, an assignment is deemed to be entered into on the earlier of:

1. The date by which the deed of assignment is signed by landlord, tenant and assignee.
2. The date the assignee, with the consent of the landlord, takes possession of the premises

Lessor Disclosure Obligations

The lessor must give the prospective assignee a lessor disclosure statement as well as a copy of the lease at least 7 days before an assignment of a retail shop lease is entered into.

It is possible for the assignee to waive this requirement for a 7 day with a waiver notice and a legal advice report, provided they are given a copy of the lessor disclosure statement and a copy of the lease.

Failure by any party to provide a required disclosure statement

If a disclosing party fails to comply with the disclosure requirements then a retail tenancy dispute will exist between the parties. Unlike a situation of failure to provide a disclosure statement upon the commencement of a new lease, here there is no automatic right to terminate the assignment.

If it is within 2 months after the assignment is entered into, the party that should have received the disclosure statement can apply to QCAT for an order that the document is provided.

Should you wish to discuss in more detail how your business may be affected, please do not hesitate to contact our office and speak to one of our commercial lawyers.