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.  It is important to understand the distinctions between them and how they might be relevant in different situations, so that you can make sure you have the right arrangement in place in your circumstances.

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.  Tenants often assume that it will be easy to get the landlord’s consent, but 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 conducting reference checks. 

Essentially the landlord wants to make sure that the new tenant will be in a position to pay the rent and meet their obligations.  It is helpful for the original tenant to provide the landlord with as much information as possible about the prospective tenant when asking for consent.

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.  If a tenant has concerns about what their landlord wants in order to give consent, they should seek legal advice as soon as possible before agreeing to the landlord’s demands.

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.

What if the tenant does not have the landlord’s consent?

This can be very serious.  The original tenant will likely be in breach of their lease, as most leases will specifically require them to obtain the landlord’s consent to an assignment.  The landlord will be entitled to take action against the original tenant for the breach (for example to recover its losses). 


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.

Landlord’s consent

A head lease will often specify that the landlord must consent to a sublease.  It is best to ensure that this consent is recorded in writing in the Deed of Sublease.

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. If a subtenant fails to make payments, the head tenant should take legal advice as soon as possible.   

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 fulfil.

Tenants wanting to sublease should make sure that their proposed subtenant is reliable and able to meet their obligations under the sublease arrangement.  This can include asking for financial information and conducting reference checks with the subtenant’s permission. 

Share responsibilities

If the head tenant is subletting only part of the premises, it may be necessary to consider how responsibilities relating to the lease are shared – for example access, insurance, and utilities.  Responsibilities may be shared between the landlord, head tenant and subtenant.  The agreed arrangement should be recorded in writing in the Deed of Sublease to avoid any doubt between the parties.

If you want to enter into an assignment or subleasing arrangement, or have concerns about your commercial lease, talk to your legal advisor to find out what is best for you.

Claire Tyler
Commercial Lawyer