Cam Appleton, Commercial Real Estate, Coldwell Banker Prestige Realty
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Assignment (lease)

Transferring your whole lease to someone else, usually when you sell your business. Most commercial leases need the landlord's consent first.

By Cam Appleton, Commercial Real Estate Agent · Updated

For example: A restaurant owner selling the business asks the landlord to consent to assign the lease to the buyer, and the landlord asks for the buyer's financials. (Illustration only, not a real deal.)

Official source: Commercial Tenancy Act (BC Laws)

Example only, not a real client. Say you are selling your restaurant and the buyer wants to take over your lease. We prepare a full consent package with the buyer’s financials and experience, and the landlord approves it within a few weeks, so the sale closes on time.

What I’d tell a friend

Read the assignment clause long before you sell. Ask whether you stay responsible after you assign, because the original tenant often does.

Why it matters to you

It's usually how you sell a business that leases its space. If the lease makes assignment hard, or keeps you on the hook after you've left, your sale can stall or you can end up liable for the buyer's rent.

How to use it in your deal

Tenants should check the assignment clause early; most leases need landlord consent, often not to be unreasonably withheld, but they may allow recapture, require financial information, charge fees or keep the original tenant liable. Many leases treat a change of control of a corporate tenant as an assignment.

Buyers of businesses should make the deal conditional on landlord consent and review the lease terms they're taking on. Original tenants and indemnifiers often remain liable after assignment unless released, so ask for a release. Landlords should review the assignee's finances, experience and use. Allow time, since consents can take weeks.

Get a written consent agreement signed by all parties, and check it covers any personal guarantee too. If you're buying, ask the landlord whether the tenant is in good standing, since you may inherit arrears or repair claims. If you're selling, don't hand over keys until the consent is signed. An assignment is different from a sublease, where you keep the lease and rent space to someone else.

Mistakes I see

Selling a business without consent. Assuming you're released. Ignoring change of control clauses.

In BC and Vancouver

Lease terms and the Commercial Tenancy Act govern; case law on consent is on CanLII.

Official sources: Commercial Tenancy Act (BC Laws) · CanLII (court decisions)

What the landlord can ask for

Many leases say you need the landlord’s consent to assign, and some add that consent cannot be unreasonably withheld. Landlords usually ask for financial statements, business experience and sometimes a fee.

A complete, well-organized request tends to get a faster answer. Build the time for consent into your sale dates.

Staying on the hook

Unless the landlord agrees to release you, you may remain responsible if the new tenant stops paying. That can matter for years.

Ask for a release in the original lease or at the time of assignment. Check with a BC lawyer on how it applies to your situation.

Selling a business with a lease: the path to closing

If the business depends on the location, the sale often depends on the landlord’s consent. A landlord who won’t approve the assignment, or wants terms the buyer won’t accept, can stop a deal that is otherwise done.

  1. Read the assignment clause first. Does consent have to be reasonable? Is a change in shareholders treated as an assignment? Does the landlord have a right to take the space back instead?
  2. Ask what the landlord will want. Usually the buyer’s financial statements, business plan and experience, and often a personal guarantee or a larger deposit. Some leases allow a fee or a share of any premium.
  3. Check the remaining term. A buyer and their lender want enough time left, often with renewal options, to make the price make sense.
  4. Make consent a condition of the sale, with enough time to get it, and don’t treat the business as sold until it’s in writing.
  5. Ask about your own release. Unless the landlord agrees otherwise, you may stay liable after you assign.

More on this for sellers: selling your business when the lease has to transfer.

Questions to ask before you sign

  • Is consent required?
  • Am I released?
  • Is there a recapture right?
  • What does the landlord need?

Keep reading

Related terms: Sublease, Change of control, Recapture clause, Indemnifier

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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.