Assignment of Lease in Victoria: Steps and Risks for Small Businesses and Landlords

If you run a small business in Victoria, your lease can be one of your biggest commitments - and one of your biggest assets.

Maybe you’ve outgrown your space, your location isn’t working anymore, or you’re selling the business. On the other side, you might be a landlord trying to keep your property leased while protecting yourself from unnecessary risk.

In many of these scenarios, an assignment of lease is the practical solution. But the process can be stressful if you’re not sure what your rights and obligations are under Victorian leasing laws.

This guide explains assignment of lease in Victoria in plain English: what it is, when it makes sense, how the process works, and what both tenants and landlords should watch for.

Note: This article is general information only and isn’t legal advice. Leases and circumstances vary, and Victoria has different rules for “retail leases” under the Retail Leases Act 2003 (Vic).

What Is An Assignment Of Lease (And When Would You Use It)?

An assignment of lease is when an existing tenant (the assignor) transfers their rights and obligations under a lease to a new tenant (the assignee). The new tenant effectively “steps into the shoes” of the old tenant and takes over the lease on the same terms (unless the parties agree to variations).

This is different from a sublease. With a sublease, the original tenant stays responsible to the landlord and grants occupancy rights to someone else. With an assignment, the intention is usually a clean handover to a replacement tenant.

Common Situations Where Assignment Makes Sense

• You’re selling your business and the buyer wants to keep trading from the same premises.
• You’re exiting the location before the lease ends (and you’d prefer not to negotiate an early termination).
• You’re restructuring your business (for example, changing the operating entity) and need the lease to move to the new entity.
• The landlord wants continuity - a new tenant without a vacancy period.

In Victoria, most commercial leases will require the landlord’s consent before an assignment can occur. That consent isn’t always automatic, and the process needs to follow both the lease and (if relevant) the Retail Leases Act.

Is Your Lease A “Retail Lease” In Victoria?

Before you plan an assignment, it helps to identify whether your lease is a “retail lease” under Victoria’s retail leasing laws, because retail leases have extra rules around disclosure and how assignments must be handled.

Broadly, a retail lease in Victoria is a lease of “retail premises” (as defined in the Retail Leases Act 2003 (Vic)). This often captures premises used wholly or predominantly for the sale or hire of goods, or the retail provision of services, to the public (including many shops, cafés, salons, gyms and other customer-facing businesses).

However, the definition has important exceptions and technical detail (including exclusions that can apply depending on the type of premises, the tenant and the deal). Whether your lease is a retail lease can depend on the specific facts - so it’s worth getting advice early if the classification isn’t clear.

Why This Matters For Assignments In Victoria

• Retail leasing rules can affect what disclosures are required and how consent must be requested and considered.
• There may be specific steps and timing requirements designed to reduce disputes and delays.
• Landlords and tenants often have stricter procedural obligations for retail lease assignments compared to non-retail leases.

If you’re working through a retail lease handover, having a lawyer review the lease terms and the assignment paperwork is often the difference between a smooth settlement and a drawn-out dispute.

How Does An Assignment Of Lease Work In Victoria? (Step-By-Step)

While every lease and property is different, the assignment process in Victoria usually follows a similar pathway.

1. Check The Lease For Assignment Clauses

Your lease will usually set out:

• whether assignment is allowed;
• when the landlord’s consent is required;
• what information the landlord can request about the incoming tenant;
• who pays the landlord’s legal costs; and
• whether the outgoing tenant must provide ongoing guarantees (more on this below).

This is also the stage where a lease review is very useful - it’s easy to overlook a clause that creates expensive consequences later. If you’re already renegotiating terms at the same time (for example, adjusting the permitted use or altering rent), you may also be dealing with a variation or extension rather than a straightforward handover.

Where you need legal help reviewing the underlying lease terms, a Commercial Lease Review is often the most efficient place to start.

2. Identify The Incoming Tenant (Assignee) And Get Their Documents Ready

Landlords usually want comfort that the incoming tenant can meet the lease obligations. Practically, the assignee should be ready to provide:

• business details (ABN/ACN and structure);
• financials (depending on the landlord’s requirements);
• trade references or rental history;
• details of proposed use of the premises; and
• details of directors/owners and any proposed guarantors.

This is where deals can stall - particularly if the incoming tenant is a new business without trading history. In that case, landlords often ask for personal guarantees or additional security.

3. Formally Request The Landlord’s Consent

Most leases require consent to be requested in writing and may specify what information must be included. If the outgoing tenant doesn’t follow the procedure in the lease, it can delay consent or give the landlord grounds to refuse.

If the lease is a retail lease, Victorian legislation can also impose requirements around how an assignment request is made and handled (including what information is provided to the landlord and the incoming tenant). In many retail lease situations, there are statutory timeframes for the landlord to respond once the landlord has received the required information.

From the landlord’s side, a clear written process and consistent requirements reduce the risk of later disputes (especially if the landlord needs to show they acted reasonably and consistently).

4. Negotiate The Assignment Terms (Including Any Ongoing Liability)

This is the part many business owners miss: even after an assignment, the lease and the assignment documents may still leave the outgoing tenant exposed in some circumstances.

Depending on the lease, the Retail Leases Act (if applicable), and negotiations, the assignment may involve:

• a release of the outgoing tenant from future lease obligations (best case for the outgoing tenant);
• an ongoing guarantee by the outgoing tenant for a certain period; or
• new guarantees from directors of the incoming tenant.

If you’re assigning because you’re selling the business, it’s crucial to align the lease assignment terms with your sale contract so you don’t end up carrying risk for a premises you no longer control.

5. Sign The Deed Of Assignment (And Any Related Documents)

The assignment itself is typically documented in a Deed of Assignment of Lease. This deed sets out:

• who the parties are (landlord, outgoing tenant, incoming tenant, and sometimes guarantors);
• the effective date of the assignment;
• which lease is being assigned;
• any conditions (for example, payment of arrears, delivery of bank guarantees); and
• ongoing responsibilities (including repairs, make-good, and guarantees).

If you’re preparing the document or want it reviewed before signing, a Deed of Assignment of Lease should reflect both the lease requirements and the commercial reality of the deal.

6. Handover: Keys, Bond/Bank Guarantee, Outgoings, And Make-Good

Finally, you’ll need to handle the practical handover, including:

• key handover and access arrangements;
• transfer or replacement of security (bond or bank guarantee);
• adjustments for outgoings and rent (depending on the date of assignment); and
• any make-good obligations (if the lease requires end-of-lease reinstatement, this can be a major cost item).

Even when an assignment proceeds smoothly, this is often where unexpected costs show up - particularly if the lease has strict make-good requirements or if there are repair issues that become a negotiation point between outgoing and incoming tenant.

Landlord Consent: Can A Landlord Refuse An Assignment In Victoria?

In most commercial leasing arrangements, you can’t assign the lease without the landlord’s consent. The real question is what the lease (and, for retail leases, the Retail Leases Act) allows the landlord to do when deciding whether to consent.

Often, the lease will say the landlord’s consent must not be “unreasonably withheld.” What’s “reasonable” depends on the circumstances. In practice, landlords commonly have legitimate grounds to be cautious, such as:

• concerns about the incoming tenant’s financial capacity to meet the lease obligations;
• concerns about proposed use (for example, a use that may breach the lease, centre rules, exclusivity arrangements, or planning/zoning);
• poor trading history or lack of relevant experience for the proposed business (depending on what the lease permits and the risk profile of the premises);
• the incoming tenant refusing to provide required security or guarantees; or
• the outgoing tenant being in breach of the lease (for example, rent arrears).

If the lease is a retail lease, there may also be statutory processes and timeframes for responding to an assignment request once the landlord has the required information. If those steps aren’t followed, it can create avoidable delay and disputes.

Practical Tips For Tenants Seeking Consent

• Be organised: provide all required documents upfront to avoid delays.
• Address risk head-on: if the incoming tenant is new, consider what security could make the landlord comfortable (within reason and consistent with the lease).
• Don’t ignore breaches: if you’re behind on rent or outgoings, resolve this early - it’s commonly used to justify withholding consent.
• Get the paperwork right: an incorrect or incomplete request can slow things down significantly.

Practical Tips For Landlords Considering Consent

• Set consistent criteria: have a standard checklist of information you request from proposed assignees.
• Document your reasons: if you refuse consent, ensure your reasons are clear and based on the lease and legitimate business concerns.
• Think commercially: a strong incoming tenant can be better than a vacancy period and a dispute with the outgoing tenant.

If you want the lease to remain enforceable and commercially workable after the assignment, it’s often worth having the assignment documents reviewed alongside the existing lease terms.

Key Legal Issues To Watch In An Assignment Of Lease

When we help clients with lease assignments in Victoria, these are the issues that most commonly cause surprises.

1. Ongoing Liability Of The Outgoing Tenant

Many tenants assume that once the lease is assigned, they’re automatically “off the hook.” That’s not always the case.

Depending on the lease, the deed, and whether the Retail Leases Act applies, the outgoing tenant may:

• remain liable for obligations that arose before the assignment date;
• have a continuing guarantee or indemnity obligation; or
• remain exposed if the documents don’t clearly record a release (or if the lease preserves ongoing liability).

If you’re exiting the lease as part of selling your business, this risk needs to be aligned with your broader sale documents and settlement timeline.

2. Personal Guarantees

If the incoming tenant is a company, many landlords require directors (or related parties) to give personal guarantees.

From the tenant’s perspective, a personal guarantee means your personal assets may be at risk if the company can’t meet lease obligations. From the landlord’s perspective, it’s a common risk-management tool - especially for small businesses.

If you’re unsure what you’re agreeing to, it’s worth pausing and getting advice before you sign anything.

3. Make-Good And Repair Obligations

Make-good clauses can be expensive, and confusion often arises around who is responsible after assignment.

• Is the outgoing tenant responsible for restoring the premises before assignment?
• Is the incoming tenant taking the premises “as is”?
• Are there existing repair issues that need to be resolved before the assignment date?

These are commercial points, but they have legal consequences, so they should be clearly documented in the deed (or in a side deed) to avoid disputes later.

4. Business Structure Changes And “Assignments” Between Related Entities

Sometimes an assignment is used when a business changes structure - for example, you operated as a sole trader and later moved into a company.

This can be a valid commercial reason to assign, but it still needs to be done properly. The landlord will often want updated guarantees, evidence of the new entity’s capacity, and confirmation that the permitted use remains the same.

What Documents Do You Usually Need For An Assignment Of Lease In Victoria?

The documents for an assignment can vary depending on whether the lease is retail or non-retail, the lease terms, and the landlord’s requirements. However, you’ll commonly see:

• Deed of Assignment of Lease: the core legal document transferring the lease to the incoming tenant.
• Landlord’s Consent (or Licence to Assign): some landlords use a formal consent document in addition to (or within) the deed.
• Guarantee and Indemnity: if personal guarantees are required from directors or other parties.
• Updated security documents: for example, replacement bank guarantees or bond arrangements.
• Disclosure documents (retail leases): retail lease assignments often involve specific disclosure steps and documents, depending on the circumstances.

If you’re a tenant, it’s important to ensure the deed reflects what you believe you negotiated - particularly around release of liability, any arrears, make-good obligations, and the handover date.

If you’re a landlord, the deed should clearly preserve your rights and ensure the incoming tenant is properly bound by the lease terms going forward.

Key Takeaways

• An assignment of lease transfers a lease from the existing tenant to a new tenant, and it’s commonly used when selling a business or exiting premises before the lease ends.
• In Victoria, the process depends on the lease terms and often requires landlord consent. If the lease is a retail lease, the Retail Leases Act 2003 (Vic) can impose additional requirements (including around disclosure and how consent is handled).
• For both tenants and landlords, the biggest risks often sit around ongoing liability, personal guarantees, and make-good obligations - all of which should be clearly documented.
• Most assignments are documented in a Deed of Assignment of Lease, often with supporting documents like consent forms, security documents, and (where required) guarantee documents.
• If your assignment is part of a broader business sale or restructure, align the lease assignment with the other transaction documents so responsibilities and timing match up.

Need help? Sprintlaw can assist with lease reviews, consent/assignment strategy, and preparing or reviewing assignment documents.

If you’d like help with an assignment of lease in Victoria - whether you’re a tenant exiting a premises or a landlord assessing a proposed assignee - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.