Does a Landlord Have to Consent to a Lease Assignment in British Columbia?

If you are selling your business, the buyer often wants to keep operating from the same premises. That usually means transferring your commercial lease to the buyer, which is called an assignment. The first question is whether your landlord has to agree.

The short answer is that it depends mainly on your lease. This article explains what British Columbia law does and does not say, what to look for in your lease, and why you should deal with consent before the sale closes.

This article covers the law of British Columbia.

What an assignment is and why consent comes up

An assignment means you hand your rights and obligations under the lease to someone else, such as the person buying your business. A sublease is different: you stay the tenant and let someone else use the space. Many commercial leases include a clause, often called a covenant, that says you cannot assign or sublet without the landlord's consent.

Buyers usually care about this clause. A business with no secure right to its location may be worth much less to them, so the lease is often treated as a key part of the deal.

What British Columbia law says

The Commercial Tenancy Act has very little to say on this topic. The only provision on a covenant against assigning or subletting is section 29(3), which deals with a trustee in bankruptcy.

Under that section, a covenant not to assign or sublet without the landlord's leave or consent does not apply to a trustee's transfer if the Supreme Court approves it, and the incoming party must give security of up to 3 months' rent.

Outside that situation, the Act does not set a general rule on when a landlord may refuse consent, so the lease terms and court decisions govern. In practice, that means two tenants with different leases can be in very different positions. Residential tenancies are under a different Act and do not apply to commercial premises.

What to look for in your lease

• The assignment and subletting clause, including whether consent is needed and whether it says consent cannot be unreasonably withheld.
• Any process the lease sets out, such as written notice, financial information about the buyer, or a deadline for the landlord to respond.
• Fees or costs the landlord can charge for reviewing the request.
• Whether you stay responsible for the lease after assigning it, or whether the landlord will release you.
• Whether a sale of shares in your company counts as a deemed assignment under the lease.
• Any renewal rights and whether they pass to the buyer.

The wording of these clauses varies a lot. A lawyer can read your lease and tell you what it likely means for your sale.

Special cases: franchises and different deal structures

If your business is a franchise, the franchise agreement usually sets the franchisor's approval rights and transfer conditions, in addition to the landlord's. Under the Franchises Act, the sale of a franchise or an interest in it, including shares in the owning corporation, counts as a grant.

The Act also says each party to a franchise agreement has a duty of fair dealing, including acting in good faith and according to reasonable commercial standards when exercising a right such as approving a transfer.

Whether the buyer is taking over the lease directly or buying shares of the company that holds it can change how the lease clause applies. Check the wording on both.

What to do next

Assigning a lease without a consent the lease requires may put you in breach of the lease. What follows from that depends on the lease and the facts, so get advice before you take that risk.

• Read the assignment clause in your lease and any amendments.
• Ask the buyer for the financial and business information the landlord is likely to want.
• Approach the landlord early, in writing, and keep a record of the request and the reply.
• Whether and how to make the landlord's consent a condition of the purchase agreement depends on your situation and on how the clause is drafted, so it is worth confirming with a lawyer.
• Ask whether you will be released from the lease or remain liable after the assignment.
• Have a lawyer review the lease and the consent documents before closing.

Frequently asked questions