deed of sublease vs deed of assignment

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Differences between Deed of Lease and Deed of Assignment

Having an understanding of property documentation is essential for anyone who wants to be or is already a real estate investor. The Deed of Assignment and the Deed of Lease (also known as the Deed of Sub-Lease) are two important documents that Real Estate investors will encounter while purchasing land. So, what are they, and can they be used interchangeably?

While the Deed of Assignment is the more commonly used of the two documents in land transactions, a Deed of Lease can also be used depending on the nature of the seller’s title or interest or the scheme purchased from.

A Deed of Assignment transfers to you ALL OF THE SELLER’S RIGHTS TO THE LAND OR HOUSE. The buyer acquires FULL OWNERSHIP, subject solely to the provisions of the Land Use Act. A Deed of Lease [Sub-Lease], on the other hand, is a type of LONG RENT OR LEASE because the title finally reverts to the Seller [the Lessor].

From the enactment of the Land Use Act in 1978 through the middle 1980s, the use of Deed of Lease was highly common to transfer property, particularly government property, in the Ikoyi, Surulere, and Victoria Island axis. These properties were largely federal government lands and high-profile lands, and it was the first step into issuing certificates of occupancy to civilians for the first time.

The government was determined to inform the public that the Land Use Act was in effect and that all lands would be leased to the people from then on, with the government acting as the landlord. However, as time passed, due to the complexities of our property law system, which cannot ignore the issue of communal or family owned land, these deeds of lease ran into numerous issues because these lands did not regulate their documents to obtain a certificate of occupancy, but the land had to be transferred somehow, either to a family member after death, through a gift to another, or through an immediate sale to a person.

It gradually changed from a deed of lease to a deed of Assignment because an Assignment means “to transfer,” and it was from that deed of Assignment that all the important information needed to trace the history of the land could be derived, which is a very important document under the law to trace how the property transferred from Mr. A to Mr. B. It was widely accepted by the local communal institutions and families who lacked the expertise or intelligence to figure out the Land Use Act. Since then, the deed of assignment has been a very common and legal method of transferring property from A to B.

If you see a deed of lease today in relation to buying a property, it should be the old colonial properties from the 1950s to the 1980s, as they are no longer popular in property transfers nowadays.

Another way to look at it now is if you buy land, a house, or property directly from the government, and the government issues you a certificate of occupancy, the Deed of Lease will be in perfect order.

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Commercial Leases: Key Differences between an Assignment of Lease and a Sublease

Similar to the trend seen overseas, working remotely has become a more common and standard practice, which has impacted the way some businesses now operate in New Zealand. Accordingly, when tenants under commercial leases are reviewing their leasing requirements they may decide that they no longer require the same area of premises. This may lead to a tenant transferring their rights under a commercial lease to another party by way of an assignment or sublease. In order to determine which arrangement is best for your business and circumstances, it is important to understand the differences between the two.

A sublease is where the tenant (commonly referred to as the sublandlord) transfers part or all of the tenancy under the sublandlord’s existing lease to a third party. It is important to note that the sublandlord retains an interest in the premises and there is no direct contract between the headlandlord and the subtenant. As a result, the sublandlord is still responsible for all lease obligations but the subtenant pays a contribution for the part of the premises that they sublease from the sublandlord. The subtenant is responsible to the sublandlord for the lease obligations under the sublease. This type of arrangement is particularly common when the sublandlord no longer requires all of the leased premises and wishes to recover some of the costs under the headlease. It is vital to ensure that the timeframe for the sublease arrangement does not extend beyond the term under the headlease. If you are considering subleasing part of your premises, the first step would be reviewing your headlease terms to see if there are any restrictions on the area or any parts within the premises that can or cannot be sublet.

An assignment of a lease involves the new tenant (commonly referred to as the assignee) agreeing to take on all of the existing tenant’s (commonly referred to as the assignor) lease obligations. The transfer of the interest is for the remaining duration of the lease. While the assignment of lease terminates the assignor’s right to possession, the assignor’s liability under the lease commonly continues to the expiry of the current lease term unless provisions are included within the Deed of Assignment of Lease or negotiated with the landlord to provide otherwise. This liability also extends to any guarantors provided. However, the standard ADLS Deed of Assignment of Lease includes an indemnity from the assignee in favour of the assignor against any claims the landlord may raise against the assignor or the assignor’s guarantors.

Once you have established which option is best suited for your business’s circumstances you need to ensure that the headlease allows for an assignment or a sublease to be granted and approach your landlord for their consent to the assignment or sublease.

If you want to assign or sublease your commercial lease or have queries about your lease, please contact us to find out which option is best for you.

Emily Merrill

Senior Solicitor

John Mackay

Related articles, all is fair in consumer contracts and trade - changes to the fair trading act 1986, help – i’ve been asked to provide a guarantee, the incorporated societies act 2022: changes you need to know about, no results have been found.

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Assigning or subleasing – what is the difference?

The terms assigning and subleasing are often used in a commercial leasing context, to refer to when a tenant transfers their rights under a commercial lease to another party. 

Assigning a Lease

A tenant may want to sell their business or move to other premises, but if their lease has not come up for expiry yet, they will not be able to terminate it.  Instead, they might need to assign their lease to the party who buys the business, or to a new tenant.

Landlord’s consent

Assigning a lease requires the landlord’s written consent.  A landlord is likely to want to know (and is entitled to know) all about the new tenant including their financial situation, the nature of their business, and conduct reference checks. 

Although they can conduct thorough due diligence on a prospective tenant, the landlord cannot unreasonably withhold their consent, nor can they ask for any extra payment in order to give their consent.  To formalise the assignment, a written Deed of Assignment of Lease needs to be completed and signed by all parties including the landlord. 

Original tenant’s liability

On a day-to-day basis the new tenant takes on all of the lease obligations.  However, the original tenant (and any guarantors to the lease) will remain liable under the terms of the lease until such time as it is terminated, varied, or renewed beyond the original renewal rights. This means that should the new tenant fail to meet any of their obligations (for example if they get behind in their rent payments), the landlord could come after the original tenant and/or their guarantors.

A sublease differs from an assignment of lease in that the original tenant (the “head tenant”) continues to be responsible for all of the lease obligations, but a subtenant is occupying the premises and paying a contribution towards the rent. 

Subleasing is common where a head tenant is not using all of their leased premises, and wants to make some additional money by subleasing a portion of the leased premises to a third party without giving up their own lease (the “head lease”) altogether.  By way of a Deed of Sublease, a subtenant agrees to pay rent for part of the premises, often a specific portion of a total area marked out on a floor plan, directly to the head tenant.

A head lease will often specify that the landlord’s consent to a sublease is needed.  If the subtenant is going to use the premises for a business use that differs from the head tenant’s as recorded in the head lease, then that new use must be disclosed to the landlord as part of obtaining their consent, and recorded in the Deed of Sublease as a variation of the head lease terms.

Head tenant’s liability

The head tenant remains liable to the landlord for the entire premises, even if a portion of that has been subleased.

The subtenant must comply with the terms of the head lease as well as their own sublease arrangement, so it is essential that they receive a copy of the head lease at the outset.  A subtenant should not sign a subleasing agreement without having reviewed the head lease first, otherwise they may find themselves with obligations they cannot fulfill.

Alan Knowsley  Partner Wellington

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The difference between assigning and subletting

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“Assigning” and “subletting” may sound like interchangeable terms.  But as we shall see, they are vastly different.

If you have space in your leased commercial premises (either all or part) that you are thinking of assigning or subletting to another, you should make yourself familiar with the legal effects, the pros and the cons of both assigning and subletting.

Click to see Larger Version of the diagram

What is an assignment of lease?

Where a tenant decides they no longer wish to be bound by a lease, they can transfer all of their rights and obligations under the Lease to another, who then assumes the position of tenant.

Circumstances where an assignment may be used are:-

• If the tenant needs to relocate to larger premises and no longer wish to be bound to the Lease.  Assigning allows the tenant to avoid costs that would otherwise be payable for ending a Lease early;
• If the tenant sells its business, so that the Lease is transferred into the name of the purchaser of the business;
• If the tenant intends to close up shop, assigning the Lease to a new prospective tenant will allow the old tenant to avoid any break lease fees associated with terminating a Lease early.

In any case, an assignment cannot usually occur without the consent of the landlord. 

The landlord will want to ensure that the prospective new tenant will be suitably qualified to meet the obligations under the commercial Lease, including financial obligations of rent and outgoings.

The main difference between assigning and subletting a Lease is that, on formalising the assignment with the necessary documentation (usually an Assignment of Lease), the existing tenant will be released of all of their rights and obligations under the Lease , from the date the lease is assigned.  From that date, the new tenant takes on all rights and responsibilities under the Lease.

What is a sublease?

A Sublease enables a tenant who has spare space (either the whole or part of a premises) that is not being utilised to sublet that space to another.

Under a sublease, the existing tenant will continue to be named on the Lease, be bound to the Lease terms and liable to the landlord.

The Sublease is essentially an Agreement between the sublessee and the existing tenant.  The existing tenant will still ultimately be responsible to the landlord, even for defaults of the sublessee, for example, non-payment of rent or damage to the premises.

The existing tenant will however, have rights of action against the sublessee personally, and may take action to recover any damages against the sublessee.

Should I sublease or assign?

Both subletting and assigning have advantages and disadvantages which must be weighed up in view of your own circumstances.

In many circumstances, the clean break from a Lease provided by an assignment may be preferential.

In other cases, a business may wish to retain control over the whole of the leased premises, while subletting individual offices or portions of space that are not being used at that time.

In any event, you must first refer to your written Lease Agreement to see whether the Lease gives the right to assign or sublet the tenancy and what procedures must be followed in order to achieve this. 

Referring to the written terms of your Lease (what you have agreed with your landlord) may redefine your available options.

Generally, a landlord must not unreasonably refuse an assignment of lease, but may, at it’s absolute discretion refuse a sublease.  However, this will ultimately depend on the wording or your own Lease and whether any legislation applies.

Legislation will apply if your Lease is for retail premises (premises involved in the retail sale of goods or services to the public).  Retail lease legislation regulates retail leases and how and when a retail lease can be assigned, the procedure and the rights of the tenant and landlord (depending on your State).  You should refer to the retail tenancies legislation in your State if this is the case.

For more information and resources:-

Landlords guide: what to do if your tenant wants to assign or sublease a commercial property.

Commercial Sublease Agreement Template Kit

Difference between a lease and licence

Pros and cons of subleasing a premises

Six bottom line issues to consider with commercial leases

Assignment of Lease Agreement Kit

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SALE OF HOUSES BY REALTORS USING DEED OF SUB-LEASE: The Validity Of Transfer Of Title Using Deed Of Sub-Lease Over Properties Covered By A Single Certificate Of Occupancy

By Nakudu Law Partners.

Imagine living in big cities in Nigeria as a tenant? The landlord’s rent trauma can be unbearable; always counting down the time till the next rent. Most times, it appears that people work for the landlord and to keep the roof over their heads no matter how uncomfortable the roof may be. Of course, such persons may have no other option than to keep saving monies to pay their rent.

At some point in your life as a starter in a big city, you’ve either been served with a notice to quit, court summons or at the least, a reminder to pay rent. For lawyers who practice in Magistrate courts within those jurisdictions, the courts are almost like rent tribunals. Those who are familiar with the court proceedings will be sure to tell you that landlord/tenant disputes dominate the court’s cause lists.

The struggle sometimes appears to be over when one acquires a house, especially from realtors and in the form of estate houses. However, little attention is often paid to the documents transferring title from the said realtors to the individual housing estate subscribers and in some cases, these transactions only elevate their status to age-long tenants in their own houses, temporarily granting peaceful possession over a long time while the realtors retain the reversionary interest in the housing estate, unknown to the subscriber.

At the moment, it is estimated that Nigeria’s housing deficit is put at over 22Million. [1] With many Nigerians homeless, owning a house will invariably deflate the statistics of the housing deficit in Nigeria. Beyond solving the issue of shelter, owning a home provides a security to the home owner and with the asset, he can obtain facility to start a business or invest in an income-yielding venture.

In practice, what is often experienced is that some groups of persons or companies who are registered to carry on the business of real estate; acquire landed property or enter into some sort of arrangement with owners of land to build estates and ask interested persons to subscribe. Usually, it starts with the interested persons going to the realtor’s office to pick up an expression of interest form, and a subsequent letter of offer/allocation of a particular plot or houses to them. In most cases, they are required to pay the purchase price of the property and in return, they are handed over a ‘Deed of Sub-Lease’ to execute as the title document transferring some number of years to the lessee. The question that now arises therefore is the propriety of such transfers using a Deed of Sub-Lease.

Who owns the land?

Land ownership in Nigeria is undoubtedly vested in the Governor of each state who is to administer the land for the benefit of the people. Land in this context includes both developed and undeveloped land. Usually, the governor grants rights to occupy a land to Nigerians or corporate bodies registered in Nigeria for a particular period of time, normally 99years upon fulfillment of some conditions.

The Land Use Act equally provides that the holder of a Certificate of Occupancy can transfer or assign his interest in the Certificate of Occupancy to a third party subject to the governor’s consent [2] , whether or not such transfer is a total or partial transfer of interest, or legal or equitable transfer.  An agreement transferring interest in land must be written. This is why lawyers prepare transfer documents such as a Deed of Assignment, Deed of Partition or Deed of Sub-lease, Deed of Lease, Deed of Mortgage and so on, all transferring various interests in land. Those captions are not as important as the wordings of the transfer.

Can A Deed Of Lease/Sub Lease Transfer Title In Land?

A lease is said to exist when one party gives or lets out his property to another for use for a period, usually in consideration of payment of rent. It is a contract for the exclusive possession and profit of land for a definite period. [3] It is important to note that in lease relationships, title to the land is not conveyed; only the use and occupation of the property is conveyed by the lessor. This is so because, in leasehold, possession reverts to the lessor after the expiration of the term given.

More often, leases are either made orally or in writing or under seal. In practise, lease above three years are required to be by Deed, that is to say, it must be signed, sealed and delivered by both parties so as to satisfy the legal requirement under the Land Use Act, as well as to create legal interest over the property when the governor’s consent is obtained and the Deed registered.

One of the major characteristics of a lease agreement is that the property owner (Lessor) has the right to sell his property whenever he chooses to do so. Where a property is subject of a lease, the right of the lessee upon sale of the property depends on the agreed terms of the lease. [4] In other words, the subsequent purchaser purchases the said property subject to the leasehold.

Possessory interest in Lease as against Proprietary interest in assignment:

The central focus in lease relationships is that the Lessor conveys exclusive possession of the demised property and not the proprietary interest. Put simply, what the lessor has transferred in the property to the lessee is only the right to occupy the premises exclusively. It means that the legal ownership of the property still remains and belongs to the lessor. The exclusivity of possession by the lessee can be terminated and extinguished once another enters the land lawfully [5] .

Possessory rights exist or arise by virtue of the protection the law accords to an actual physical occupant of land, even if it is wrongful or adverse. The primary right which such physical occupation confers is the right to exclude others. So, a possessor can therefore exclude all those interfering with his possession except the person with a better right to immediate possession [6]

On the other hand, the term “proprietary interest” is defined as the interest held by a property owner together with all appurtenant rights [7] which explains why a tenant or lessee cannot question the proprietary right of his landlord [8] . That is to say, a lessee cannot challenge ownership of the lessor.

Also, a right of possession can be exercised or enforced by the party in actual possession against the whole world except the true owner. [9]

Status of a Sublease :

Generally speaking, a sublease is a minor lease proceeding from a major lease, in which the lessor of land grants part of the terms which he holds to another. Where the lessor grants the entire remainder, it will amount to assignment of the interest in the property, in other words, it will technically amount to sale of the property subject to legal requirements.

In essence, the right of the lessee is limited to the peaceful and quiet possession of the land/property during the term of the lease agreement. A landlord reserves the right to alienate or do with his land whatever he desires regardless of a pending lease agreement, except where such action interferes with the lessee’s interest in the land. [10]

Arguably, under the Land Use Act, Right of Occupancy has often been viewed as a sui generic (class of its own) interest in land, more appropriately called a statutory lease. This view appears to have been supported by Nigerian courts as the Court of Appeal in L.S.D.P.C vs. Foreign Finance Corporation [11] . In Osho vs. Foreign Finance Corporation [12] the court held that: “ The right of occupancy is in nature a hybrid between a licence and a lease… on terms and conditions which upon breach by a right holder is subject to revocation by the governor ”

Therefore, though the Right of Occupancy under the Land Use Act does not meet the common law requirement for a lease (that is certainty of time, object, execution, etc.), it can be described as a form of statutorily created lease peculiar to lands covered by the Land Use Act. This is because, the framers of the Act, (as can be deduced) clearly intended that the right contained in the Right of Occupancy should be in the nature of a lease out of which lesser interests could be created. However, in practise, given the peculiarity of leasehold, a Deed of Lease has never been an acceptable way of conveying the entire proprietary interest in land regardless of the inference that the nature of grant in Right of Occupancy by the governor appears to be leasehold. Interestingly, the Nigerian courts have always interpreted a lease agreement to only grant possessory interest of the property as against proprietary right, which means that the lessor reserves the right to convey his proprietary right to another buyer who can buy off the proprietary right of the lessor leaving the lessee with only the right of possession that will be extinguished at the expiration of the years granted.

Is using Deed of Sublease by realtors to transfer ownership of interest in estate houses a good practice?

As has been amply demonstrated above, assignment of entire interest in land cannot be achieved using a Deed of sublease. This is because the reversionary interest [13] in the land lies with the lessor once granted less one day. This is equally the case in a sublease that has been described as a lease under an existing lease.

Put simply, when the Deed of sublease (as currently used by real estate companies) is used as a title document transferring an interest in the land, at the expiration of the term granted in the sub-lease or even while the leasehold is existing, the sub lessor can validly assign or convey the remaining year or days in the head-lease to another person subject to the leasehold already granted to the lessee.

The above point can be demonstrated using two scenarios. Scenario A ; if Mr. A has a right of occupancy of 99years over a plot of land in Bompai Kano State, and he sub-lets 90years to Mrs. B , Mr. A reserves the proprietary right over the property while Mrs. B retains the possessory right. At the expiration of the 90years granted to Mrs. B, the reversionary right of the 9years reverses to Mr. A and he can assign or covey the remaining 9years to another person subject to statutory compliance. Scenario B, using the same property and parties, while Mr. A has sub-let 90years to Mrs. B, Mr. A can proceed in the same year to assign the remaining 9years to Mr C subject to the 90years sub-lease granted to Mrs. B. What it then means is that Mr. C will have to wait for the expiration of the 90years already granted to Mrs. B before he can take possession of the property.

The point being made is that; where the transfer of interest in land is done by way of a lease or a sublease as the case may be; the lessor or sub lessor will usually retain the reversionary interest in the property. In other words, whatever interest that has been transferred reverts to the lessor upon expiration of the lease.

It must be pointed out here that the case may be different where the lessor or sub-lessor sublets the entire remaining years, also referred to as unexpired residue, to the lessee or sub-lessee, in which case his reversionary right has been extinguished once the governor consents to such transfer. What it then means is that the governor can deal directly with the sub-lessee over the Right of Occupancy granted to the lessor over such property. However, the difficulty with this kind of practise usually lies with the uncertainty of the remaining years. If the years granted to the lessee is less, then the reversionary right is retained by the lessor, where it is more, we would argue that such grant over the remaining years in the certificate of occupancy is voidable on the doctrine of “Nemo dat quot non-habet” meaning granting what the lessor never had

What is then the proper practice of conveying interest in estate covered by a certificate of occupancy?

Understandably, realtors face the difficulty in determining the appropriate mode of conveying interest of houses or apartments purchased by individuals in real estate houses given that the land upon which the estate houses are built is often covered by a single certificate of occupancy. Ordinarily, preference would be given to both parties executing a Deed of assignment, but where an estate is built, using a single certificate of occupancy may present some technical legal challenges. However, the creative way to ensure that the interests of all the subscribers to the estate houses are protected is to do either of the following:

• Prepare a separate Deed of assignment for each building/purchaser together with As-Built Survey Plan (ABSP) and then obtain the consent of the governor and register the deed alongside with the ABSP at the Lands Registry. Alternatively, prepare a separate Deed of partition for each building together with As-Built Survey Plan (ABSP), obtain the consent of the governor and register the deed alongside with the ABSP at the Lands Registry. The documents should be accompanied with:
• A letter of authorization to register either the Deed of assignment and/or Deed of partition signed by the holder(s) of the certificate of occupancy.
• A valid means of identification (either national ID card, international passport, voter’s card, driver’s licence) of the holder of the certificate of occupancy.
• In the case of a company, the means of identification of the directors, certified true copy of CAC form7, certificate of incorporation, and company’s resolution authorizing the assignment and registration of the property.

Both Deeds (either assignment or partition) are acceptable for registration showing that interest over that particular portion purchased by the purchaser has been transferred. The certificate of occupancy will be provided for sighting in the course of the registration.

To succeed in a land dispute, a person in possession of title documents executed in his name will more often than not get judgement in his favour. We will rest our argument on decided cases where the courts have over and again emphasized that one of the modes of proving ownership of land in Nigeria, is the production of properly executed title documents to the land which is now the most authentic mode of proving title to land [14] , as against a deed of lease/sublease, a deed of assignment is a more reliable means to prove title in land.

We understand the position of the Land Use Act, particularly section 22 which makes the Governor/FCT minister a head-lessor over lands within their territory, however, the Conveyancing Act as applicable in Federal Capital Territory recognises and allows an assignment by way of Deed of Assignment.

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• Emmanuel Omole

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• Isimeme Andrew

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DISCLAIMER: This article is carefully drafted with the sole intention of providing general information on the subject matter. It does not in any way create a client/attorney relationship between readers and our Firm. We are always readily available to provide top-notch legal services.

[1] https://thenationonlineng.net/housing-deficit-now-22-million-says-fmbn/

[2] Section 34(2) of the Land Use Act 1978.

[3] Prudential Assurance Co Ltd v London Residuary Body (1992) 2 AC 286

[4] Registered Trustees of Master’s Vessel Ministries (Nig) Incorporated v. Emenike & Ors (2017) LPELR-42836(CA)

[5] Olukoya v Ashiru (2006) ALL FWLR part 322, p.1479 at 1514

[6] ANENE & ORS v. OKOYE (2013) LPELR-21877(CA)

[7] ENUN v. EKPO(2012) LPELR-19703(CA)

[8] AJIE & ORS v. AHUNANYA & ORS (2000) LPELR-10062(CA)

[9] Farajoye v. Hassan (2006) 16 NWLR (Pt. 1006) Pp. 499 para. G

[10] REGISTERED TRUSTEES OF MASTER’S VESSEL MINISTRIES (NIG) INCORPORATED v. EMENIKE & ORS (2017) LPELR-42836(CA)

[11] (1987) 1.N.W.L.R. (pt50) 413 at 444.

[12] (1991) 4. N.W.L.R. (pt184) 157 at197

[13] Reversionary interest is the interest that a person has in a property when a preceding estate ceases to exist Reversionary interest in the context of real property or wills and estates means a reservation created in a real property conveyance that the property will revert back to the original owner upon the happening of a certain event.

[14] BAZAMFARE & ANOR v. ADAMU & ANOR (2017) LPELR-CA/J/245/2016, IBETO v. NWANOSIKE & ORS

(2013) LPELR-CA/PH/128/99

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What is the Difference Between Subletting and Assigning a Lease?

By Lianne Tan Lawyer

Updated on February 5, 2020 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

What Is a Lease Assignment?

What is subleasing, is assignment or sublease more appropriate, key takeaways.

As a tenant, you might find yourself in a situation where you need to get out of the lease. Here, you can choose to either:

• assign the lease; or
• sublet the premises.

Both assignment and subletting will require your landlord’s consent before you do so. While there are some similarities between both options, there are key differences between the subletting and assigning a lease. This article explains the crucial distinctions between assignment and subletting and outlines when each would be appropriate.  

Assigning a lease is the process of transferring all your obligations as a tenant under a lease to a new tenant. The new tenant will then be responsible for:

• paying rent;
• paying outgoings; and
• any repair and maintenance obligations.

The party that you assign the lease to will become the tenant under the lease.

However, it is important to understand that an assignment does not release you from your legal responsibilities under the lease. This means that you are still responsible to the landlord if the new tenant breaches the lease. 

For example, if the new tenant does not pay their rent, you will be legally responsible for paying it.

 There are some exceptions to this, including:

• where your lease includes a clause releasing you from all your obligations under the lease on an assignment; or
• if you are a retail tenant and the relevant state or territory-based laws outline that you will no longer be legally responsible on an assignment.

If you wish to be released from your legal responsibilities after you assign your lease, you will need to negotiate this with your landlord.

Assigning a lease will often require that you meet a set process and conditions, including: 

• obtaining your landlord’s consent; and
• proving that the new tenant will be able to meet their obligations under the lease.

When finalised, all parties should sign a deed of assignment which formalises the arrangement. 

Subletting your premises allows a new tenant to take over either: 

• part of your premises; or 
• all of your premises.

Depending on how much of your premises you have sublet, the third party will also take over some of your legal obligations under the lease. 

For example, if you run a teaching centre at your premises, you might sublet a classroom to a tutoring business. The tutoring business will then pay part of your rent and may be responsible for maintaining the classroom that you have sublet out.

If you sublet your premises, you are still legally responsible under the lease. This means that if your subtenant does not meet their obligations under the lease, you will be responsible for  rectifying any breaches. 

For example, if your subtenant fails to pay their rent, you must still pay the full rent to the landlord. If you do not, you will be in breach of the lease. 

It is important to remember that if you sublet your premises, you effectively become the sublandlord under your sublease. Generally, a sublease will include and incorporate the terms of the original lease you signed with the landlord as well. In this case, you should take care to exclude certain obligations of your landlord, like to insure the building.

If you are subletting the premises to share the financial cost of the lease, you should pay attention to the timing of the subtenant’s obligations. This will ensure that the subtenant will pay you their portion of the rent before you are due to pay the landlord.

Like an assignment, subletting will require you to follow a certain procedure and meet certain conditions. You will also need to obtain the landlord’s consent before you proceed. To formalise the arrangement, both you and the subtenant must sign a sublease.

Whether an assignment or a sublease is more appropriate for you will depend on your intention for your business.  

A sublease may be more appropriate if you:

• intend to downsize your business;
• wish to share part of the costs under your lease; or
• have additional space in the premises that you have no use for.

On the other hand, if you intend to sell your business or end your lease early, an assignment will be more appropriate.

While both assigning and subletting your premises allows you to pass on part or all of your premises to another party, they are two distinct types of dealings. An assignment passes on the whole of the property to a third party and may allow you to be released from legal responsibility. In comparison, a sublet allows you to offload part of your lease obligations to another party, while you still remain legally responsible under the lease. If you have any questions about assigning or subletting a lease, contact  LegalVision’s leasing lawyers  on 1300 544 755 or fill out the form on this page. 

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Deed of lease or sub-lease

Home  /  deed of lease or sub-lease.

List of Requirements for Perfection of Deed of Sublease:

• Application fee: 10,000.00
• Registration fee: 10,000.00
• Approval Fee: 5% of Development Fee
• All copies of Deed of sublease
• Payment of accrued ground rent
• Survey Plan
• Passport photograph of Lessor & Lessee (optional)
• Stamp Duty (as regulated by IRS)

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