When you buy or sell a business, make sure you get the lease transfer right.

Rose Lawyers on 9 June 2016

Your commercial lease is one of the most important documents in your business life. It's also one of the largest financial commits you can make, so it's essential that all the details are correct.

When you buy, sell or transfer ownership of a business, you need to make sure that the business ownership, commercial lease, and all other important documents are transferred properly. Otherwise, you could find yourself financially and legally responsible for someone else's commercial lease.

Buying, selling or transferring a business

There are a number of different circumstances that might require you to transfer a commercial lease. Most commonly, this will be when you buy or sell a business that is operating from premises that are leased. Obviously, when a business changes hands through a purchase or sale, the lease needs to be in the name of the new tenant.

There are also times when you will need to transfer the lease when the business is not bought or sold. For example, if one or more of the business owners is leaving the business. If the intention is that the person who runs the business is also the leaseholder, then you must always ensure that the legal responsibilities for the lease are transferred correctly so that this is the case.

Why you need to transfer the lease

As a general rule, you should transfer the commercial lease whenever there is a change in the ownership of the business. This is just as important whether you are the new or outgoing tenant. If you do not transfer the lease properly, and the person who takes over the business fails to pay the rent for whatever reason, then you will be held liable for it. On the other hand, if you are the new owner and the lease is still in the name of the old owner, you will not have any control over the lease.

Of course, you don't plan on having any problems when you take over a business, but you still need to be prepared for any eventuality.

lease agreement form

Things you need to look out for

There are a number legal considerations that you need to take into account when you are transferring a commercial lease to ensure that it is done properly.

Things you need to consider include:

  • The disclosure statement – You need to give the appropriate disclosure statement to ensure your liability for the lease is severed.
  • The time remaining on the lease – Whether you are handing over or coming into a lease, you need to consider how well the business is positioned, including the time remaining on the lease. A lease with years left on it may be more desirable than one with only six months left.
  • Other lease details – You should also consider things like whether the lease has an option to renew it, what the rental will be and whether any part of the rental will be conditional on profit or income.

You need to make sure that your decision to take over a business is properly informed, and the terms of the lease will likely influence your decision.

Why you need a lawyer

It is always a good idea to have a lawyer prepare, or at least review, the transfer of lease documents, whether you are the incoming or outgoing tenant. They will be able to make sure that the lease adequately protects your interests. You should also use a lawyer to ensure that the disclosure statement has been prepared correctly and that the right type of disclosure document has been used.

Something that a lawyer will help you with during this process that you might get wrong on your own is making sure the transfer of lease document is executed properly. This will help ensure that the transfer is legally binding on all parties.

Business law experts

Getting expert advice on business law matters will ensure that your interests are protected. Whether you are the incoming or outgoing tenant, you need to make sure that all the documents are correct.

At Rose Lawyers, we have over 35 years of experience with business law matters. We will ensure that your commercial lease transfer goes smoothly.

Get expert advice for all your business matters, call Rose Lawyers on 03 9878 5222.