Sublease or assignment?
On an assignment, you transfer the whole lease to someone who becomes the tenant in your place, and under the Retail Leases Act 2003 (Vic) the existing lease simply continues (s 8). On a sublease, you keep your lease (the head lease) and grant a new, shorter lease of all or part of the premises to a sub-tenant. You become the sub-tenant’s landlord, and you remain the tenant under the head lease.
A sublease generally has to end before the head lease does. A sublease for the whole of the remaining term may take effect as an assignment instead.
You stay liable under the head lease
- You must keep paying rent and complying with the head lease, whether or not the sub-tenant pays you. A breach by the sub-tenant, such as an unpermitted use, can put you in breach of the head lease.
- The sub-tenant generally has no contract with the head landlord, so the head landlord looks to you.
- If the head lease is forfeited, the sub-lease generally falls with it. For a registered sub-lease, the Transfer of Land Act 1958 (Vic) says so expressly (s 71(3)). A sub-tenant may apply to the court for relief, including an order vesting the premises in it for no longer than its sub-lease term (Property Law Act 1958 (Vic) s 146(4)).
- If you surrender the head lease by agreement, the sub-lease is generally preserved, with the head landlord’s interest treated as the reversion on it (Property Law Act 1958 (Vic) s 139). See lease surrender.
The landlord's consent
Most leases prohibit subletting without the landlord’s consent. What the landlord may take into account depends on whether the Retail Leases Act applies.
- Retail leases. The limited grounds for refusing an assignment do not apply to subleases. A retail lease may give the landlord an absolute discretion to refuse consent to a sub-lease, licence or concession over all or part of the premises (s 63). If the lease does not reserve that discretion, its own wording governs, because s 144 of the Property Law Act 1958 (Vic) does not apply to retail leases (s 60(2)).
- Other leases. Where a lease prohibits underletting without consent, consent is not to be unreasonably withheld unless the lease expressly provides otherwise (PLA s 144(1)). For premises licensed under the Liquor Control Reform Act 1998 (Vic), that rule applies despite any contrary provision (s 144(2)).
- Costs and charges. A retail landlord can recover its reasonable legal and other expenses connected with a sub-lease, including investigating the sub-tenant and obtaining consents (s 51(2)). It must not seek or accept key money, which the Act defines to include a premium for consenting to a sub-lease (ss 3 and 23). Under other leases, the PLA implies that no fine is payable for consent, unless the lease expressly provides otherwise, though the landlord may require a reasonable sum for its expenses (s 144(1)).
For how a landlord should handle the request, see consent requests.
Does the Retail Leases Act apply?
The Act defines a lease to include a sub-lease (s 3). It applies to premises that, under the terms of the lease, are used or to be used wholly or predominantly for retail purposes, and status is tested when the lease is entered into or renewed (ss 4 and 11(2)). So the head lease and the sub-lease are each tested, and the answers can differ.
A sub-lease of a shop to a retailer is likely to be a retail lease, with you as the landlord. A sub-lease to a listed company is likely to be outside the Act, because that exclusion turns on who the tenant is (s 4(2)(c)). In the other direction, VCAT has held, on a preliminary question, that a head lease was not a retail lease where the head tenant’s business was subletting parts of the premises to retail tenants: once it gave sub-tenants exclusive possession it was no longer using the premises, and subletting was not the retail provision of a service (Izett St). See does the Retail Leases Act apply.
Your obligations under a retail sub-lease
Under the Act, the landlord is the person entitled to the rent under the lease (s 3). Under a retail sub-lease, that is you, so the landlord’s obligations are yours:
- Disclosure. The proposed sub-lease and the Small Business Commission’s information brochure as soon as negotiations start (s 15), and a disclosure statement at least 14 days before the sub-lease is entered into (s 17). If you were given a disclosure statement for the head lease, you need give the sub-tenant only a copy of it and details of changes since then that you know of, or could reasonably be expected to know of (s 17(1A)).
- Minimum term. At least 5 years including options or, if your head lease has 5 years or less to run, that remaining term less one day, unless the sub-tenant obtains a Small Business Commission waiver certificate and gives it to you (s 21). See the five-year minimum term.
- Repairs. The repair obligations in s 52 fall on you under the sub-lease, whatever the head lease says about the head landlord’s obligations to you.
- Land tax. A term making the sub-tenant pay land tax or CIPT for which the landlord or head landlord is liable is void (s 50).
Drafting the sub-lease
- End the sub-lease, including any option, before the head lease ends, and say what happens if the head lease ends early.
- Attach the head lease, and require the sub-tenant to comply with it so far as it applies to the sublet area.
- Take an indemnity from the sub-tenant, and security and guarantees that match the risk.
- Line up rent, outgoings, insurance, repairs and make good with the head lease, so you are not left with costs you cannot pass on.
- Make the sub-lease conditional on the head landlord’s consent, and record that consent’s conditions.
- A sub-lease of a registered lease for 3 years or more can be registered. The Transfer of Land Act 1958 (Vic) then implies a covenant by you to pay the head lease rent and observe its covenants (s 71(1) and (4)).
For the other rules a retail sub-lease must follow, see our guide to the Retail Leases Act.
How we help
- A free 15-minute phone call about whether subleasing suits your situation.
- Reviewing the head lease and its consent requirements.
- Preparing the sub-lease, the disclosure documents and the consent deed.
- For head landlords, assessing a request to sublet.
Common questions
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Only if the lease allows it, which usually means with the landlord’s written consent. A retail lease may give the landlord an absolute discretion to refuse. Under other leases, consent generally cannot be unreasonably withheld unless the lease expressly says otherwise.
Yes. You remain the tenant under the head lease and must keep paying the landlord, then pursue the sub-tenant under the sub-lease.
It can be. The Act defines a lease to include a sub-lease, so a sub-lease of retail premises is generally covered, with you as the landlord. Whether your head lease is covered is a separate question.
Under a retail lease, it can recover its reasonable legal and other expenses, including investigating the sub-tenant, but it cannot charge key money for its consent. Under other leases, the Property Law Act implies that no fine is payable for consent unless the lease expressly provides otherwise, but reasonable expenses can be recovered.
Law referred to
- Retail Leases Act 2003 (Vic) ss 3 (definitions of key-money, landlord and lease), 4, 8, 11(2), 15, 17, 21, 23, 50, 51(2), 52, 60(2) and 63.
- Property Law Act 1958 (Vic) ss 139, 144 and 146(4).
- Transfer of Land Act 1958 (Vic) s 71.
- Izett St Pty Ltd v Applgold Pty Ltd [2021] VCAT 174.
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about Victorian law as at October 2026. It is not legal advice about your lease.
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