Do You Need Landlord Consent to Assign a Commercial Lease in Alberta

For many small businesses, the lease is the most valuable part of the sale. A restaurant or shop without its location may be worth far less to a buyer. That is why assigning the lease, meaning transferring your tenant rights to the buyer, often sits at the centre of the deal.

This article explains the questions to ask about landlord consent, how to think about a lease that is silent or a refusal, and the practical steps to take. The answers turn on your specific lease, so a lawyer should review it.

This article covers the law of Alberta.

What assigning a lease means

An assignment moves the tenant's interest in the lease to a new tenant.

An assignment is different from a sublease, where you stay the tenant and give someone else the right to use the space. Buyers and sellers sometimes mix the two up.

Start with what your lease says

Most commercial leases contain a clause about assigning or subletting. Read it closely before you agree to any sale terms.

• Does it require the landlord's written consent to assign?
• Does it say consent cannot be unreasonably withheld, or leave it to the landlord's discretion?
• Are there conditions, such as financial checks on the buyer or a guarantee from the buyer or owners?
• Does a sale of shares count as an assignment under the lease? Some leases treat a change of control that way.
• Does the landlord charge an administration fee or have a right to end the lease instead of consenting?

Also read amendments, renewals and any earlier correspondence with the landlord. They can change the picture.

When consent may not be refused unreasonably, and when the lease is silent

Some leases say the landlord cannot unreasonably withhold consent. Where that wording is present, the landlord's reasons for refusing usually matter. Whether a particular reason for refusing consent is acceptable depends on the wording of your lease and your situation, so it is worth confirming with a lawyer. How this applies to your lease is a legal question.

If the lease is silent about assignment, do not assume you are free to assign or that the landlord can refuse. The answer depends on the lease as a whole and the law that applies to it, and a lawyer can confirm your position before you commit to a closing date.

If consent is refused or delayed

• Ask the landlord in writing for the reasons.
• Offer more information about the buyer, such as financials and business experience, or additional security.
• Ask whether the landlord would agree if the terms of the lease change.
• Have your lawyer review whether the refusal fits the lease wording.
• Make the sale agreement conditional on landlord consent, so you are not forced to close without the premises.

Making the deal conditional protects both sides. Without that condition, a buyer could be bound to a purchase with no location, or a seller could face a claim.

Related tax and registry points, and next steps

Tax can apply to the lease side of a deal. Even with a valid section 167 election, tax is still payable on a taxable lease, licence or similar supply of property. Ask your accountant how this applies.

Searches can also help. Alberta Corporate Registry searches can show registration date, owners, directors and legal addresses for a corporation, and Personal Property Registry searches can be requested at any registry agent office in Alberta.

• Get a complete copy of the lease and all amendments.
• Have a lawyer review the assignment clause.
• Ask the landlord for written consent, with any release of the seller.
• Make closing conditional on consent.
• Ask your accountant about GST on the lease and the rest of the deal.

Frequently asked questions