Transferring a Lease When the Business Is Sold

Who has to agree

The financier that owns the equipment has to consent. The outgoing and incoming owners agreeing between themselves is not enough.

Until that consent is given and documented, the original party normally remains liable for the payments.

A search of the Personal Property Securities Register, the PPSR, shows which equipment on the premises is already financed. It belongs in the due diligence, not after settlement.

Where a personal guarantee was given, it does not fall away simply because the business changed hands. It needs releasing in writing.

How the incoming owner is assessed

The same things any applicant is assessed on: trading history, financial position, and how long the entity has existed.

A newly formed entity buying an established business often has no trading history of its own, which is a frequent reason a transfer stalls.

If the assessment does not clear, the alternatives are usually a settlement by the outgoing owner, or a new agreement in the buyer’s name with a fresh device.

The three ways this usually resolves

1. The lease is assigned to the buyer with the financier’s written consent, and the seller is released.
2. The seller settles the agreement at sale and the buyer takes out their own.
3. The equipment is excluded from the sale entirely and goes back at the end of its term.

The checklist, in the order it needs doing

1. Raise the equipment as soon as the sale becomes likely, not in the week of settlement.
2. Find every agreement and note which financier holds each one.
3. Ask each financier what it needs to assess the incoming owner, and start that early.
4. Establish whether a personal guarantee was given, and by whom.
5. Get any release of that guarantee in writing before settlement, not after.
6. Agree in the sale contract who carries the obligation if consent is refused.
7. Confirm the consent is documented before the keys change hands.

What goes wrong when it is left late

Consent takes time, because it involves a credit assessment of a party the financier has never dealt with.

Where settlement happens without consent, the seller can find themselves still liable for a machine sitting in premises they no longer own.

This page is general information about how equipment finance generally works in Australia, not legal advice. Your sale contract and your lease govern your position, so have both reviewed.