Avoid These Common Contract Pitfalls – Watch Now!
Did you know changes in your company’s shareholders or directors could trigger a deemed assignment requiring consent? Or that your guarantees might still be binding after assigning a lease?
Watch this quick video to learn how to avoid these costly mistakes and protect your business
Got questions? We're here to help!
VIDEO TRANSCRIPT
Ross Millen:
Hi. I wanted to talk to you today about two common problems that I find in connection with assignments. Now, the first of these is what we might call a deemed assignment, and that's where you're not actually assigning the contract or the lease, but there's some change in the company that's one of the parties to the document. So what happens is that there's a more than say 50% change in the shareholding, and then that's deemed to be an assignment that you needed to get the landlord's consent to. And some people overlook this.
The other problem is some of these deemed assignment clauses, whether they're in leases or other contracts, are even more restrictive. Any change in the share ownership, any change in the directors can be a deemed assignment. So first, when you're entering into your contracts, make sure you don't have a very onerous deemed assignment clause, or later if you're doing an assignment, any change to your directors or shareholders, always check that this isn't going to be a deemed assignment that you need to get consent from the other party of the contract.
Now, the second problem I see is where people are assigning leases and maybe they've given a guarantee. So are they still on the hook with their guarantee? Better to try and get rid of it. And remember, if you've got a retail lease, you can follow the procedure set out in the Retail Leases Act to make sure your guarantee is at an end.
But if you've got any queries about deemed assignments in contracts or leases, or getting your guarantees cancelled, remember to contact me or anyone else at Millens; we're here to help
