REALWorld Law

Commercial leases

Transferring the lease

In what ways, if at all, can a lessee transfer its rights to a third party and what restrictions can be imposed on such transfers?

Angola

Angola

In general, transfers of leases to a third party require the lessor’s consent.

However, commercial leases may be transferred by conveyance without the lessor’s consent. Notice must be given as the lessor has a pre-emption right. The conveyance has to be executed by deed.

A transfer of an establishment (a temporary and costly transfer of the use of the property, together with the operation of a commercial or industrial establishment) does not require the lessor’s authorization, but the lessor should be informed within 15 days, in writing. The transfer agreement has to be executed by a public deed.

The lessee cannot sublet the property, either totally or partially, without the lessor’s authorization in writing. Should this authorization not exist, the lessor may terminate the contract based on the lessee’s default.

Australia

Australia

A tenant is able to transfer its leasehold right to occupy the real estate to a third party through an assignment of the lease to a third party or a sublease of the existing lease to a third party as a subtenant. In most cases, the consent of the landlord to an assignment or sublease is required.

An assignment of the lease involves transferring the benefit of the landlord's obligations under the lease and renders the assignee liable under the lease.

Alternatively, where the lease provides for it and with the landlord's consent, it is possible for a tenant to sublease the existing lease to a subtenant.

Belgium

Belgium

General leases (offices, warehouses, industrial buildings)

The tenant is entitled to sublet and to assign his lease to a third party, unless this right has been expressly excluded or limited, which is usually the case. Standard leases will require the landlord's prior written consent.

A tenant who does not have his principal residence in the leased premises cannot sublet it, either in whole or in part, to a subtenant who would use it as his principal residence.

Commercial leases (retail and workshops)

A tenant is entitled to sublet and to assign his lease to a third party, unless this right has been expressly excluded or limited, which is usually the case. Standard leases require the landlord's prior written consent.

In the case of commercial leases that are governed by the Commercial Leases Act, restrictions on the subletting or the assignment of leases don't apply where the entire business is being transferred as a going concern. Formal notice of the proposed transfer must be given to the landlord, however, who may object on certain specific grounds.

Commercial leases (pop-up retail and workshops)

Under the Flemish pop-up lease Decree, assignment and subletting of the pop-up lease are forbidden at any time. Under the Walloon pop-up lease Decree and the Brussels pop-up lease Ordinance,  assignment and subletting are also forbidden, unless there is an express written agreement between the landlord and of the tenant.

Bosnia-Herzegovina

Bosnia-Herzegovina

Tenants can transfer premises to third parties unless this is prohibited in the contract. A lease normally provides that any transfer will be subject to the landlord’s consent, although if a transfer is allowed under the terms of the lease then the landlord can only withhold consent on reasonable grounds.

Under the Law on Obligations tenants can sublet premises to third parties unless this is prohibited by the contract.

A lease will normally state that any transfer requires the prior consent of the landlord. If a sublease is allowed under the terms of the contract then the landlord can only withhold consent on reasonable grounds.

Canada

Canada

Because leases grant tenants a property interest in the leased premises, a tenant’s interest in a lease can be legally transferred. The terms of the lease will dictate whether the tenant is permitted to assign its lease for the remainder of its term, sublease all or a portion of its leased premises, mortgage its leasehold interest or otherwise grant rights in the leased premises to a third party. Even if not absolutely prohibited, the tenant’s ability to assign or sublet will usually be conditional upon obtaining the landlord’s prior consent in most cases. If the lease is silent as to whether transfers are prohibited, the law will allow the tenant to transfer its lease. Many commercial leases will deem a change of voting control of a corporate tenant to be a transfer requiring consent of the landlord.

If a party is in occupation other than pursuant to a lease (ie by a simple license) any rights of occupation are personal and non-transferrable except with consent of the licensor.

China

China

The lessee may sublet the premises or transfer its rights and obligations to a third party. The lessor's written consent is always required for both types of dealing.

Croatia

Croatia

The lease will usually state that any transfer requires the landlord's consent. Where a subletting agreement has been concluded without permission, the landlord may terminate the lease agreement.

Czech Republic

Czech Republic

The lessee may sublet the premises or transfer rights and obligations to a third party only with the lessor's consent. The form of the consent must be the same as the form of the lease agreement. If the lessee gives a third person  the right to use the leased property without the necessary consent,  this is deemed to be a substantial breach of the lessee's obligations.

For business premises, the lessee is entitled to transfer a lease of the premises in connection with the transfer of  the business activities carried on at the premises with the prior written consent of the lessor; an obligatory written form is required for a transfer agreement.

Finally, the lease may be subject to a transfer of the lessee’s enterprise. An enterprise usually includes all business activities, assets, other values, employees, etc, ie anything that can be operated as a business unit.  A lease can be  significant part to it. If the lease is transferred along with those assets as a part of the enterprise, no lessor’s consent is required.

Denmark

Denmark

The law allows a transfer of the rights under the contract to a third party. A lessor can prevent such transfer only if it can raise serious objections to the suggested third party. The relevant provisions are non-mandatory.

The lessor can, in the contract, require that the rights are not transferred to third parties or that the rights can be transferred to a third party only when the lessor has approved the transfer.

The law does not grant the lessee the right to sublet, however, the parties can agree in the contract that the lessee has such right.

France

France

The assignment of the leasehold right may be framed and/or prohibited by the lease’s stipulations and has to be distinguished from the assignment of the business which includes the leasehold right.

Leases normally stipulate that any transfer of the lease by the tenant to a third party is strictly prohibited or requires the landlord's prior written consent.

However, this requirement does not apply where the transfer of the lease is linked to the sale of the tenant's business (fonds de commerce). Unless otherwise provided, the tenant will remain jointly liable with the assignee and any subsequent assignees for a 3-year period from the assignment.

By law, sub-letting is not permitted, except if otherwise agreed. However, sub-letting is usually permitted in commercial leases, subject to the prior consent of the landlord. Subletting authorization is typically granted for parent companies and/or third party companies having an equivalent financial healthiness. Even when sub-letting is allowed by the landlord, the tenant shall call the landlord to the signing of any sublease to make it valid.

Germany

Germany

The transfer of the tenant's interest in a lease requires the landlord's consent. A tenant is permitted to sublet with the landlord's consent. Whether the transfer/subletting of part of the leased property is allowed depends on the specific contractual provisions agreed by the parties.

As a basic principle if the landlord denies its consent to subletting, the tenant is allowed to terminate the lease provided the choice of subtenant does not constitute good grounds for the landlord to refuse permission for the subletting.

Hong Kong, SAR

Hong Kong, SAR

Commercial leases generally prohibit assignment, subletting, the creation of a mortgage or any kind of alienation of the lease by the lessee. Sometimes, with the lessor's consent, the corporate lessee will be allowed to share the premises with its parent company or any subsidiary companies which operate the same business as the lessee.

Due to the pro-lessor environment in Hong Kong, the restriction on alienation is often extended to restrict any change of control in the corporate lessee without the lessor's consent through any acquisition, merger, etc, and the lessee is even in default if it becomes insolvent (or bankrupt in the case of an individual). 

Hungary

Hungary

Under Hungarian law it is legally possible to transfer commercial leases provided that this is done with the consent of the landlord. The law requires that such consent should be given in writing. Commercial lease agreements usually provide that the landlord's approval may not be unreasonably withheld and sometimes a deadline is also set for the landlord's response.

Transfers of leases by tenants are not very common, because in such cases most landlords prefer to enter into a new agreement with the new tenant.

Ireland

Ireland

A landlord cannot unreasonably withhold consent to the transfer of the whole of a property under a lease but can refuse consent to the transfer of part of a property. The landlord can also impose certain restrictions, although these must be reasonable, and normally concern the financial status of the proposed third party.

Different rules apply to residential property.

Italy

Italy

Pursuant to the Italian Civil Code, the lessee can assign the lease contract to a third party subject to the landlord’s prior consent. The lease contracts can provide that the landlord’s consent cannot be unreasonably withheld and/or identify specific cases in which the landlord’s consent can be considered as already granted (for example, in case of assignment to group companies).

In case the landlord grants its consent to the assignment, the lessee is released from its obligations under lease contract unless the landlord declared not to release the lessee from such obligations; in the latter case, the lessee remains jointly liable with the assignee in relation to the lease obligations.

As a partial departure from the above provisions, in case the lease is assigned (or the premises are subleased) to a third party as part of a business branch (ie in the context of a business transfer) the landlord’s prior consent is not required.

The landlord is free to transfer the title of ownership to the leased premises. In such a case, the lease contract remains fully valid and effective between the purchaser, as new landlord, and the lessee.

The landlord can assign the lease receivables to third parties, unless this is prohibited under the lease contract.

Japan

Japan

Under Japanese law, a lessee is not entitled to transfer the lease or sublease the premises to a third party without the lessor's consent.

If the lessee wishes to transfer ownership of its own building located on a leased parcel of land but the lessor does not consent to the transfer of the lease or sublease of the land without ‘due reason’, the lessee may seek the court's permission to transfer ownership of its own building in lieu of the land parcel lessor's consent.

Netherlands

Netherlands

Lessees of office and industrial space are not entitled to assign the lease, unless agreed otherwise in the lease or with the permission of the lessor.

With regard to leases relating to retail space, the Dutch Civil Code contains a mandatory provision enabling the lessee to demand the substitution of a third party as lessee under the lease if the lessee intends to transfer its business to the third party. In the event that the lessor does not agree with the (intended) substation, the lessee can request the court to decide whether or not to allow such a demand. The court may accede to such a demand if the lessee has a good case for the transfer. The court may deny the demand if the third party cannot provide guarantees that it (i) will fulfil the obligations under the lease agreement, and  (ii) that it will act as a ‘good lessee’. The court may order the assignment subject to changes and/or conditions. Such changes and/or conditions will usually relate to the security that the new lessee should provide to the lessor. No assignment of the lease is possible if the leased premises are vacant.

Nigeria

Nigeria

The lessee can transfer its right and interests in the property to a third party subject to the specific covenants contained in the lease agreement with the lessor on the right to transfer. It is usual for lease agreements to impose an obligation on the lessee not to transfer the interests or cede possession of the property to any person without the written consent of the lessor.

For commercial leases, the lessee can only transfer the unexpired residue of the agreed term it holds upon fulfilment of any condition agreed for the transfer of the lease interests and this can be effected through the following methods:

  • Assigning by deed, the unexpired residue of the lease. In this instance, the lessee has no reversionary rights in the property; or
  • Sublease of all the unexpired residue (less one day) or sublease of a lesser term of years in which case the lessee retains the right of reversion in the property.

The lessor may negotiate with the lessee in the lease agreement the conditions for the transfer of the interests in the property. Such restrictions may include the following:

  • lessor’s right of first option to the property at an agreed fee;
  • consent of the lessor which may include an agreed consent fee; and
  • executing a deed of adherence by the sub-lessee to comply with the terms of the lease agreement.
Norway

Norway

Under the Tenancy Act, a tenant cannot transfer its rights or obligations under the tenancy agreement to anyone else without the landlord's consent. Depending on the circumstances, the landlord may be free to withhold consent or may be obliged not to withhold it unreasonably. The parties will also often agree further pre-conditions, for example that transferring 50 percent or more of the shares, participation or owner interest is deemed to be a transfer of the lease.

Tenants do not normally have a right to sublet, or transfer the right of use to anyone else without prior written consent from the landlord. However, in this case the landlord is normally obliged to give consent if there are no objective grounds for withholding it.

If the lease is for a fixed term, the tenant can, with the landlord's consent, sublet the property for the remaining period of the lease. If consent is refused, and the landlord cannot demonstrate that there were objective grounds for this refusal, the tenant can terminate the lease by giving three months' notice unless the lease explicitly states otherwise.

Poland

Poland

Generally, if such a right is not specifically excluded in the agreement then the tenant may transfer its rights to occupy the real estate to a third party. However, according to most agreements this can only be done with the landlord's consent.

Sublease is also possible but requires a tenant’s consent (or lack of protest in case of the lease). However, the sublease expires no later than the date of ‘basic obligation’ expiration.

Portugal

Portugal

In general transfers of leases to a third party require the landlord’s consent. Non-residential leases (of commercial and industrial establishments) may be transferred by conveyance without the landlord’s consent, notification to the landlord being sufficient, although the landlord has a pre-emption right.

A transfer of an establishment (a temporary and costly transfer of the use of the property together with the operation of a commercial or industrial establishment) does not require the landlord’s authorization, but the landlord should be informed within one month.

As a rule the parties establish these matters in the contract. If the consent is not required, the parties normally limit the scope within which it is possible to assign the rights, for example to companies of the same group.

The tenant cannot sublet the property, either totally or partially, without the landlord’s authorization in writing, which is a valid condition of the sub-leasing. Should this authorization not exist, the landlord may terminate the contract based on the tenant’s default.

Romania

Romania

Under Romanian law, total or partial subletting or assignment of the lease agreement is allowed unless the main lease agreement expressly forbids it.

Unless the parties have expressly agreed otherwise, the tenant has the right to assign the lease agreement to any third party.

Slovak Republic

Slovak Republic

In general, the tenant is entitled to sublet the property unless agreed otherwise in the contract. However, the consent of the landlord is required for subletting a leased apartment.

According to the Act on Leasing and Subleasing Commercial Premises, a tenant can sublet non-residential premises only with the landlord's written consent, and only for a limited period of time.

Spain

Spain

When the leased property is used for a business or professional activity, the Spanish Urban Leases Act allows the lessee to sublet the property or assign the lease agreement without obtaining the landlord’s consent.

In the event of a partial sublease by the tenant the landlord is entitled to increase the rent by 10 percent and by 20 percent if the lease agreement is assigned or the property is completely sublet.

Any change in the identity of the lessee as a result of a merger, spin off or corporate transformation is not deemed to be an assignment, but the landlord is still entitled to increase the rent as set out in the previous paragraph.

The landlord must be notified of any assignment or subletting within one month of the date they were agreed.

Tenants can be prevented from transferring their rights to others by specific provisions in the lease agreement.

Sweden

Sweden

Leases often restrict the right of tenants to transfer the lease without the landlord's consent. According to statute, the lessee in a commercial lease that has lasted more than three years has a right to transfer the lease in connection with the sale of a business of which the lease is a part. If the lessor refuses, without reasonable cause, the Rent Tribunal can give permission to transfer the lease.

Leases also often restrict a tenant's right to sublet the premises without the consent of the landlord. According to statute, the tenant may sublet part of the premises without the landlord's consent, but a sublease of the whole premises requires the landlord's agreement or permission from the Rent Tribunal.

Thailand

Thailand

This matter is solely a contractual arrangement between the parties.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

The law provides that a tenant cannot assign or sublet the whole or part of the property without the landlord’s prior written consent. The UAE Civil Code imposes a duty on the parties to act reasonably.

Consent does not need to be ‘prior’, and can be explicit or implicit, however, unauthorized assignment triggers a right of termination in favour of the lessor.

The terms of a sublease may differ from the terms of the lease provided that:

  1. They are not contrary to the main lease
  2. The sub-lease term does not exceed the term of the headlease
  3. The contractual term does not exceed the length of that under the lease

Within the Abu Dhabi Global Market free zone

The Abu Dhabi Global Market laws are silent on this issue, and therefore the parties are free to contract as they wish.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

The law provides that a tenant is not permitted to sub-let the property unless otherwise agreed in the lease or by the landlord. There is no requirement for the landlord to not unreasonably withhold or delay its consent to a sub-letting.

A sub-lease must end on (or before) the date of the expiry of the lease, unless the Landlord agrees to renew it. Therefore, if a 'head' lease is terminated prior to the end of the term, the sub-lease will automatically end and there is no obligation on the landlord to grant a direct lease to the sub-tenant.

In practice, the provisions of a lease tend to cover sub-letting and therefore it is possible for a tenant to negotiate a more flexible approach to such arrangements.

The law requires any change in a contract (such as the assignment of a lease) to be agreed to by all the parties to it. Therefore, the assignment of a lease will require the landlord's prior consent. Again, there is no requirement for a landlord to not unreasonably withhold or delay its consent.

UK - England and Wales UK - England and Wales

UK - England and Wales

Under English law, a lease is considered to be a proprietary interest in land, so it is legally possible to transfer it to someone else. The lease will usually state that any transfer requires the landlord's consent, although statute requires that this should not be unreasonably withheld or delayed.

If the lease was entered into after 1 January 1996 the outgoing tenant will normally remain liable under the covenants in the lease during the period of occupation by the incoming tenant, but not subsequently, but whether or not the tenant will remain liable depends on the specific terms of the lease.

If the lease was entered into before 1 January 1996, the original tenant remains liable under the covenants in the lease throughout the term of the lease, no matter how many times the lease is transferred to new tenants.

If a party is in occupation other than pursuant to a lease (ie by a simple licence) any rights of occupation are personal and non-transferrable.

UK - Scotland

UK - Scotland

Under Scottish law, if the lease does not specify otherwise, then the tenant can transfer its interest to a third party without the landlord's consent. However, in practice, almost all leases include restrictions on transfer.

Transfers of part of a leased premises are usually prohibited and complete transfers are usually subject to the landlord's consent, although this must not be unreasonably withheld.

Under Scottish law (unless the lease expressly provides otherwise) the original tenant is no longer liable for any future obligations under the lease from the date of transfer onwards.

Ukraine

Ukraine

Under Ukrainian law a lessee is entitled to transfer his rights under the lease agreement to a third party subject to the lessor's approval, unless the parties agree otherwise in the lease agreement. Leases of state and municipal plots of land may not be assigned, or granted as a contribution to the charter capital of a company, or subjected to a pledge.

United States

United States

Generally speaking, a lease can prohibit the tenant from assigning its leasehold interest in the lease for the remainder of its term, subleasing all or a portion of the leased premises, mortgaging its leasehold interest or otherwise granting to a third-party rights in the leased premises. Even if not absolutely prohibited, the tenant’s ability to assign or sublet will usually be conditional upon obtaining the landlord’s prior consent. The standard for the landlord’s consent will typically vary on a lease-by-lease basis.  For example, some leases may require a landlord to not act unreasonably in withholding consent, and other leases may allow a landlord to withhold consent in its sole discretion. If the lease is silent as to whether transfers are prohibited, the law of most states will allow the tenant to transfer its lease.

Zimbabwe

Zimbabwe

There is normally a clause in the agreement that states whether the lessee can cede or assign its rights and obligations, transfer, make over, alienate or pledge any of its rights under the agreement, with the landlord’s prior written consent. A deviation from this would result in a breach of the contractual terms and the landlord would then be permitted to terminate the lease agreement in accordance with the termination provisions.