Key Takeaway Points
- New provisions will come into effect on 1 August 2025 under the Property Law Act 2023 (Qld) which will impact the assignment of leases in Queensland.
- The changes introduce a new procedure for landlord’s consent to an assignment, provide that assignors and their guarantors (if any) are to be released from all liability upon assignment, and clarify the enforceability of rights and obligations after an assignment of lease.
Overview
The Property Law Act 2023 (Qld) (PLA) is introducing a range of changes that come into effect tomorrow. These changes include amendments to the process for and effect of an assignment of a lease.
The changes which are being introduced work alongside some of the provisions which are already embedded in the Retail Shop Leases Act 1994 (Qld) (RSLA) to govern the assignment of leases and clarify the rights and obligations of lessors, assignors and assignees after an assignment.
This article provides an overview of the key changes that will commence under the PLA, which expand on the previous protections for lessees, and establish a new process for lessor’s consent.
Requirement for lessor’s consent to assign lease
The PLA introduces a new procedure which must be followed if a lease requires the lessee to obtain the consent of the lessor to assign a lease, enter into a sublease, part with / share possession of the leased premises, change the permitted use, grant a mortgage over the lessee’s interest in the leased premises and alter or carry out works to the leased premises. The lessee must give the lessor a proposal notice asking for consent, which contains any information required under the lease.
The lessor must make its decision within one (1) month of receiving the full particulars of the lessee’s proposal and any require that further information be provided if required to make its decision. The lessor cannot unreasonably withhold consent and must either:
- set out the conditions (if any) of its consent in its decision notice; or
- give reasons as to why its consent is withheld (if applicable) in its decision notice.
The lessor and the lessee can agree to extend the period in which the lessor make give its decision notice. The lessee may apply to the court to make a decision if the lessor fails to give a decision notice, or the lessee believes consent has been unreasonably withheld or conditioned.
If the lessee makes an alteration or carried out work in relation to a leased premises without lessor’s consent, the lessee is required to restore the leased premises to the condition they were in immediately before the alteration / works were carried out.
Effect of an assignment of lease
The PLA clarifies that from the date of an assignment of lease, the assignee is bound by each lease term within the lease document and consequently receives any benefit of such terms that the outgoing lessee was entitled to.
This provision applies irrespective of whether the lease term touches and concerns the land, or whether it is expressed, implied or imposed by law. The exceptions to the enforceability of this provision against the assignee include if:
- the lease expressly states that the term is personal (ie for the benefit of the outgoing lessee only);
- the lease restricts the transfer of the term to the assignee; or
- the lessee and the assignee contract out of the provision.
Implications for subsequent assignees
A subsequent assignment occurs where a lessee assigns the lease to an assignee, who further assigns the lease to a subsequent assignee. The PLA makes clear that the original lessee and its guarantor will not be liable to the lessor for a breach of the lease by the subsequent assignee.
The release of liability of the original lessee applies despite any agreement to the contrary, meaning the parties cannot contract out of the provision. However, it is noted that the provision does not apply retrospectively, and that the assignee may still remain liable for the breach of the subsequent assignee.
This provision alters the existing common law position and is somewhat less restrictive than the position in the RSLA, which provides for the outright release of an assignor if the disclosure requirements are complied with.
New leasing forms must be used
From tomorrow, the new approved PLA leasing forms that must be used include:
- Form 7 – Notice to remedy breach;
- Form 8 – Breach notice – Intention to refuse to renew, or extend the term of, or sell the reversion of, a lease; and
- Form 9 – Notice to terminate lease.
These new forms must be completed and served by the relevant lessor or lessee, or assignor or assignee, to ensure they are entitled to exercise their rights under the PLA.
What are the objectives of the incoming changes?
The new changes to the assignment of leases provisions under the PLA aim to:
- reduce uncertainties surrounding the enforceability of lease terms;
- adequately balance the rights of the parties to an assignment of a lease; and
- clarify the liability of the parties following an assignment or subsequent assignment of lease.
Next steps
Our Property team is happy to assist if you have any queries about how the PLA provisions about the assignment of a lease may affect you.
For further information about the changes being introduced tomorrow, our previous articles on the PLA can be accessed here:
- Changes to Property Law in Queensland – RedeMont
- Understanding QLD’s New Seller Disclosure Regime – RedeMont
- New QLD PLA 2023: Changes to easements – RedeMont
