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Assignment and Subletting

April 25, 2017

 

 

Absent any language to the contrary, a lease can be freely assigned or sublet. Because a lease is both a contract and a conveyance, these can be independent grounds for liability.

 

An assignment is a complete transfer of the tenant’s remaining lease term. Any transfer for less than the entire duration of the lease is a sublease.

 

Assignee tenants are in privity of estate with the landlord, and thus they are liable to the landlord for the rent and any other covenants in the lease that run with the lease. However, if the assignee tenant reassigns the leasehold to a subsequent tenant, then the assignee tenant’s privity with the landlord ends because the subsequent tenant is now in privity with the landlord.

 

The sublessee is not in privity of estate or contract with the landlord; as such, the sublessee is not liable to the landlord for the rent or any other covenants in the lease, but he is liable to the lessee. If the sublessee assumes the rent and covenants, then he becomes personally liable to the landlord.

 

Original Tenant’s Liabilities

 

When there is an assignment, the privity of estate held by the original tenant terminates. It does not terminate upon a sublease. However, because there is still privity of contract, the original tenant remains liable for all covenants in the lease even after an assignment.

 

Limitations on Assignment and Subletting

 

When a lease prohibits the tenant from assignment and subletting, the tenant may still assign and sublet. But, the landlord may terminate the lease for breach of a covenant and recover damages.

 

When a lease prevents assignment or subletting without permission of the landlord beforehand, the modern trend is that permission can be withheld for commercial properties. Non-assignment and non-sublet clauses are valid but they are narrowly construed.

 

If the landlord knows of the assignment or sublease and does not object, it may be waived.

 

Dealing with such a claim can be a difficult and drawn-out process. It is important to retain experienced and professional attorneys in order to maximize the effectiveness of your claim. Please call Aziz Legal by phone (408) 203-4627 or email us at abid@azizlegal.com.

 

This article is merely informational and is not intended to be used as legal advice. Use of any information from this article is for general information only and does not represent personal legal or tax advice, either express or implied. Readers are encouraged to consult Aziz Legal, or another attorney, for any specific legal matters.

 

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