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Answer:
If you are looking to exit your lease before the date set out in the lease agreement, it is important
to understand the options available. Understanding the difference between subletting and
assigning the lease is important because it can have an ongoing impact on your obligations to the
landlord. This article will outline the differences between subletting and assigning your lease.
What is an Assignment?
An assignment of lease (https://legalvision.com.au/how-to-transfer-a-commercial-lease/) usually
occurs when you want to assign your interest in the lease to another party – the assignee.
For example, this could mean assigning the whole of the shop or leased space.
When you assign your lease, you are transferring your entire proprietary interest to the assignee.
Once the lease is properly assigned, the assignee will assume your obligations under the lease,
and you should be released from these obligations.
What is Subletting?
Subletting occurs (https://legalvision.com.au/tips-for-subletting-commercial-property/) when you
transfer part of your interest in the property to another party. This party is known as the ‘sub-
tenant’. Here, you can sublease part of the property, like a room or section of the tenancy. This
means you do not have to give up the entire property. Alternatively, you can sublet the entire
premises for a fixed period of time within the lease period.
Usually, the sub-tenant will pay you rent under a sublease agreement and treat you as their
landlord. As the head-tenant, you will assume liability on behalf of the subtenant for any damage
or loss that may occur.
It is important to understand that a sublease does not release you from your obligations under the
lease. You still retain your lease with the landlord, irrespective of any issues that may arise with
the sublease.
In the case of an assignment, the landlord usually has the right to approve the new assignee. The
landlord is likely to request information such as:
financial statements;
a CV or business history; and
identity documents of the proposed assignee.
This way, they can determine whether or not they think they will be suitable to maintain the lease.
Ensuring that the terms of the sublease or assignment are in writing can be key in ensuring your
lease is properly assigned or subleased.
Key Takeaways
It is important to understand the difference between assigning and subletting a lease, so you can
choose the best option for your business.
assignments transfer your entire interest in the property and usually releases you from your
obligations;
subleases do not release you from your obligations and allow you to transfer part of your
interest in the property and retain your entire interest;
in both cases, your lease will set out when and how you can assign or sublet.
If you need assistance with assigning or subletting your lease, contact LegalVision’s leasing
lawyers (https://legalvision.com.au/need-a-commercial-leasing-lawyer/) on 1300 544 755 or fill
out the form on this page.
Sarah is a Lawyer in LegalVision’s Regulatory and Compliance and Intellectual Property Disputes
teams. Sarah offers effective assistance to a range of startup, small business, and corporate
clients. She focuses on the practical implications of a regulated environment for each client and
guides those clients through relevant Australian Consumer Law considerations.
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