At some point during your tenancy, you will need to assign your lease whether to sell your business, restructure for tax purposes, or bring in a partner. However, the ability to assign is not automatic. It is governed by detailed, often restrictive, clauses in your lease agreement.

These clauses can impact your ability to:

1. Assign the lease when selling your business.
2. Assign the lease to a professional or business corporation.
3. Transfer company shares for income splitting or sale purposes.
4. Secure financing for your practice.

‍📌 Assignment Means More Than You Think

The term “assignment” covers a broad range of common business activities. Most tenants will encounter one or more of these situations during the life of their lease. Unfortunately, if your lease is not structured correctly, any one of these clauses can block the assignment and seriously reduce the value of your practice.

Let’s explore a few typical examples.

🔍 Key Lease Provisions to Watch For

‍1. Assignment When Selling Your Business or Transferring Shares

Many leases contain language like:

‍“Landlord's consent shall not be unreasonably withheld”
While this may sound fair, it gives landlords the discretion to block an assignment. If the proposed assignee (e.g., a younger dentist or a new corporation) has lower net worth or experience than you, the landlord may withhold consent, legally and “reasonably.”

‍“Tenant will pay standard assignment fees”
Standard fees are generally understood to include legal and administrative costs, often totalling $3,500 + HST. However, some landlords, especially larger REITs, claim a percentage of the sale price as part of their “standard” fee. In one case, this amounted to 5% of a $4 million sale ($200,000).

‍“Tenant not released upon assignment”
Even after assigning your lease to a buyer or to your own corporation, you remain legally liable for lease obligations, possibly for years after the business has changed hands.

‍“Landlord may terminate lease as an alternative to assignment”
This clause gives the landlord the right to end your lease rather than approve the transfer. If exercised, it reduces the business value.

‍“Landlord may increase rent upon assignment”
This provision allows the landlord to raise the rent when you assign the lease, effectively lowering the value of your practice by increasing operating costs for the buyer.

2. Assignment When Sharing Premises or Subletting

‍Some leases prohibit arrangements like renting chair time or splitting treatment fees with associates. These may be interpreted as transferring rights to a third party, thereby violating the lease and risking default. 

‍3. Assignment Related to Financing

If your lender secured financing using business assets located on-site and your lease prohibits such pledges, you may be in default. This technical breach can result in penalties, including the loss of renewal rights.

✅ What Should You Do?

If You Already Have a Lease:

• Know your lease. Have it professionally reviewed to understand your rights and restrictions.
• Plan ahead. Use your next renewal negotiation as an opportunity to improve assignment terms.
• Seek professional support. Retain a qualified lease consultant when preparing for an assignment.

‍If You Are Entering an Offer to Lease/New Lease:

• Start with strategy. Work with a knowledgeable negotiator to secure assignment terms that protect your long-term goals.
• Think beyond Year One. While rent costs matter, clauses that affect future business transitions can have a far more significant impact.

💡 Final Thought

Assignment clauses may seem minor, but they are often the difference between a smooth transition and a costly disaster. Protect your investment, your retirement, and your practice’s value by ensuring your lease supports your business lifecycle from start to finish.

👉 Call RLCI @ 70-742-1220 to schedule a complimentary lease review with our lease consultant today

Because the right lease strategy now can protect  everything you have worked so hard to build.