Where a tenant decides they no longer wish to be bound by a lease, they may either sublet the premises or assign the lease. Both require the consent of the landlord.
What is a sublease ?
A sublease is an arrangement where the tenant grants another party the right to lease part or all the premises. The sublessee is given the right to exclusive possession as part of the interest has been assigned. However, the original tenant is still legally responsible under the lease. It is important to note that if you choose to sublet your premises, you essentially become the sublandlord. Reasons for subleasing include :
- To relieve financial pressure, particularly if there is unused space on the premises.
- They provide flexibility for individuals seeking a short- term lease as they tend to fall within 6-24 months.
- The landlord may secure further party for rental income.
What does it mean to assign your lease ?
An assignment of a lease involves transferring the lease from one party to another. The entire proprietary interest is transferred to the assignee. All your obligations as a tenant are now transferred to the new party (assignee). Once assigned, they are responsible for paying the rent and any maintenance obligations as they become the new tenant. Like a sublease, you are still legally responsible if the new tenant breaches the lease. However, there are some exceptions to this, including if a clause in the lease releases you from any obligations upon assignment.
Should I choose to sublet or assign the lease ?
Your intentions regarding the premises will determine the most suitable option. Assigning the lease will be recommended if you wish to sell or relocate your business. You will be absolved of any responsibilities if there is a clause in the lease agreement. Alternatively, subletting the lease would be suitable if there is unused space within the premises or you wish to be relieved of some financial burdens.
Key Takeaways
It is important to note the main difference between assigning and subletting a lease. With subleasing, only a part of the interest is given to the sublessee. You are still legally responsible under the lease. When assigning a lease, you transfer your entire interest in the property. Depending on the lease agreement, you are generally released from any obligations. Subletting or assigning the lease must be conducted in accordance with the Retail Leases Act 1994.
Phil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.
Sarah is a penultimate year Law and Business student at UTS. She has a great interest in corporate and commercial law, and is involved in many international human rights projects.
