In short
When selling or restructuring a business in NSW, transferring the commercial or retail premises lease is rarely automatic. A business sale contract does not transfer the lease itself; the tenant must secure the landlord's formal consent through a Deed of Consent to Assignment.
The legal procedure, grounds for landlord refusal, statutory timelines, and outgoing tenant liability differ substantially depending on whether the lease is classified as a retail lease under the Retail Leases Act 1994 (NSW) or a standard commercial lease under the Conveyancing Act 1919 (NSW).
Is your premises governed by the NSW Retail Leases Act?
Before initiating an assignment, verify whether your lease falls under the Retail Leases Act 1994 (NSW). The title on the front cover is not legally conclusive. Even if a document states "Commercial Lease", it is governed by retail leasing legislation if the premises are used wholly or predominantly for an activity listed in Schedule 1 of the Act, or if the shop is located within a retail shopping centre.
Understanding this threshold is vital because the Retail Leases Act provides mandatory statutory protections regarding assignment consent, a 28-day decision timetable, and potential release from future lease liabilities. For a comprehensive analysis of classification criteria, see our guide on whether your NSW lease is a retail lease.
What does your lease require for landlord consent?
Almost all commercial leases in NSW contain an alienation clause prohibiting the tenant from assigning, subletting, or parting with possession of the premises without the lessor's prior written consent.
Lease assignment clauses typically require the outgoing tenant to prove that the incoming assignee:
- Is respectable, responsible, and has sufficient financial resources to pay the rent and outgoings;
- Has proven commercial experience in the relevant industry to operate the business successfully;
- Will continue using the premises strictly for the permitted use specified in the lease;
- Provides adequate financial security, such as replacement bank guarantees or director guarantees;
- Executes a formal tripartite Deed of Assignment and pays the landlord's reasonable legal and administrative costs.
Crucially, many modern commercial leases also contain "change of control" clauses. In corporate tenancies, transferring 50% or more of the company's voting shares is legally deemed an assignment requiring landlord consent, even if the tenant company's name on title remains unchanged.
What information must the outgoing and incoming tenants provide?
Landlords are entitled to evaluate the incoming tenant's commercial pedigree before granting consent. An assignment request package must be meticulously assembled to avoid delays:
- Formal written application: A formal request specifying the proposed assignment date and business background;
- Financial verification: Last two years of financial statements, personal asset and liability statements for proposed guarantors, and a bank reference letter for the assignee;
- Commercial resume: Detailed CVs showing the assignee's industry experience;
- Statutory disclosure statements (Retail Leases): For retail premises, the outgoing tenant must provide an updated Lessee's Disclosure Statement to the assignee at least seven days before requesting consent, and deliver copies to the landlord.
On what legal grounds can a landlord refuse consent?
A landlord cannot withhold consent arbitrarily or capriciously, but their legal limits depend on the statutory framework:
Under the Retail Leases Act 1994 (NSW) (Section 39): The landlord may withhold consent only on limited statutory grounds:
- The proposed assignee proposes to change the permitted use of the shop;
- The proposed assignee has inferior financial resources or retailing skills compared to the current tenant;
- The tenant has failed to comply with the statutory disclosure procedure under section 41.
Under General Commercial Leases (Conveyancing Act 1919 s 133B): Where a lease contains a covenant against assigning without consent, section 133B implies a proviso that consent shall not be unreasonably withheld, and no fine or premium shall be payable. Whether refusal is reasonable is assessed objectively based on the proposed assignee's financial viability, business suitability, and any risk to the landlord's property interests.
How long does the lease assignment process take?
Securing landlord consent typically takes between 4 and 8 weeks from initial submission to final deed execution. Business sale contracts should always allow a realistic condition-precedent period.
For retail leases, section 40 of the Retail Leases Act establishes a strict 28-day statutory response framework. If the tenant complies with the formal request and disclosure requirements under section 41, the landlord is deemed to have consented if they fail to give written notice consenting or refusing consent within 28 days of receiving the request. However, this 28-day clock only starts once complete, compliant documentation is served.
Will the outgoing tenant remain liable after the assignment?
This is the most dangerous trap for vendors selling a business. Under general commercial contract law (privity of contract), an outgoing tenant and their guarantors remain liable for future tenant defaults throughout the remainder of the lease term unless the landlord expressly releases them in writing.
In NSW, the rules diverge dramatically between retail and non-retail leases:
- Retail Leases (Section 41A statutory release): If an outgoing retail tenant and guarantor provide compliant disclosure statements to the assignee and request consent properly under section 41, section 41A provides that the assignor and any guarantor are released from ongoing liability for rent and obligations under the lease upon assignment. However, if the disclosure contains false or misleading information, this statutory protection is completely lost.
- Commercial Leases: There is no automatic statutory release. Outgoing tenants must negotiate an express release clause in the Deed of Consent to Assignment. If the landlord refuses, the vendor remains liable if the buyer subsequently defaults. Vendors must demand a back-to-back indemnity and personal guarantees from the buyer's principals.
Can the landlord demand fees, legal costs or new security?
In retail leases, section 24 prohibits landlords from seeking "key money" or benefits simply for granting consent. However, landlords are entitled to recover their reasonable legal and other expenses incurred in reviewing the application and preparing the deed, provided an itemised invoice is delivered.
The landlord can also require the incoming assignee to replace the bank guarantee or cash security deposit before releasing the outgoing tenant's original security bond.
What happens if the parties settle before obtaining consent?
Parting with possession without landlord consent constitutes an immediate, irremediable breach of lease. The landlord may issue a formal notice of default under section 129 of the Conveyancing Act 1919 and terminate the lease by lawful re-entry and lockout.
For details on lockout risks and urgent Supreme Court relief against forfeiture, review our dedicated guide on commercial lease default and lockout notices in NSW. Always make your business contract strictly conditional on obtaining unconditional landlord consent prior to settlement.
What essential steps must vendors complete before exchanging contracts?
Before executing a sale of business contract involving leased premises:
- Review the unexpired lease term and verify the validity of any upcoming retail lease option renewal deadlines;
- Audit make-good obligations and ensure all historical rent and outgoings reconciliations are fully paid;
- Check the assignment clause for change of control triggers, guarantor release conditions, and assignee criteria;
- Obtain professional legal assistance to prepare the request pack, negotiate the Deed of Assignment, and coordinate settlement alongside your broader vendor legal checklist.
Our property and commercial team advises both landlords and tenants across our leasing for tenants, leasing for landlords, and business transactions practice.
Do you need advice on transferring a commercial or retail lease?
Biz Lawyers & Advisory guides vendors, purchasers, and property owners through lease assignments, landlord consent negotiations, and transaction completion across New South Wales.
Contact Biz Lawyers & Advisory or call 1800 893 836 for strategic leasing and business sale advice.
This article provides general legal information only. It is not formal legal advice. Commercial lease assignments involve contractual interpretations and statutory compliance that require individualized assessment.
Primary sources
Law and guidance checked 3 September 2026.
