Ardor Legal | The Impact of Queensland’s new Property Law Regime on Lease Assignments – Part 3 (s144)
Part 3 - Effect of assignment of lease by transferee to subsequent transferee (s144)

Since the start of this 3-part series analysing Queensland’s Property Law Act 2034 (the Act), the Act has now passed in Parliament. The Act’s commencement awaits proclamation and is expected to follow a 12-month transition period allowing for further consultation and education given the extensive reforms.

In this final instalment of our series, we analyse the implications of Section 144 on lease assignments, and how it alters the enduring liabilities traditionally accompanying lease transfers.

Dissolving Perpetual Liability

Lease assignments have customarily carried the potential for ongoing obligations for the original tenant and guarantor. Traditionally, this meant that even after a lease was assigned the original tenant and any guarantors (i.e. directors or shareholders of the tenant) would have ongoing legal and financial obligations under the terms of the original lease.

However, Section 144 marks a dramatic departure from conventional practice. Specifically, it dissolves any such tenant and guarantor liabilities after two subsequent assignments. Moreover, the Act explicitly prevents parties from contracting out of Section 144.

For landlords accustomed to relying on perpetual tenant and guarantor obligations, this change could carry significant implications. This departure from longstanding norms will likely impact leasing strategies.

A Balancing Act

Sections 142 and 144 of the Act combined pose a two-sided dilemma for landlords evaluating lease assignments. Section 142 restricts landlord’s from unreasonably refusing consent to assignment requests, giving tenants greater latitude to assign leases. However, Section 144 simultaneously limits landlord recourse against original signatories following assignments by ending their lease obligations after two subsequent transfers.

Ultimately, Sections 142 and 144 shift leverage around lease assignments to tenants. Consequently, reliable safeguards should be implemented early on. This new provision calls for cautious rethinking of lease terms and risk strategies. With limited recourse beyond two assignments, conducting stringent initial reviews of prospective tenants grows in importance. Meanwhile, incorporating clearly defined assignment terms into lease agreements can help avoid disputes over unreasonable refusals.

Preparing for the New Normal

The Property Law Act 2023 (Qld) drives significant shifts from longstanding commercial leasing norms. Notably, Section 144 disrupts conventional practice by dissolving liability of original tenants and guarantors after two assignments—where perpetual obligations were previously permitted.

In essence, the new Property Law Act will compel all parties to reorient themselves to unfolding changes. As Queensland’s property laws transform, proactive adjustments become prudent. Although the new regime brings challenges, it also creates opportunities for those ready to adapt. Because one truth remains constant – the law itself is anything but static. And all of us must navigate through its ever-evolving landscape.

Contact us today on (07) 3161 2847 or info@ardorlegal.com.au for personalised guidance, tailored solutions, and expert insights that will safeguard your interests and foster a smoother transition in this evolving legal environment. Your success is our priority, and we’re ready to be your trusted partner in property law.