What Is a Commercial Lease Assignment?
A commercial lease assignment happens when a tenant transfers all of the rights to a lease to someone else but remains liable for rent payments to the landlord.4 min read
A commercial lease assignment happens when a tenant transfers all of his or her rights to a lease to someone else but remains liable for rent payments to the landlord.
A Tenant's Right to Assign or Sublet a Commercial Lease
Due to difficult financial times, businesses have been forced to downsize.
Often these businesses find themselves in commercial leases for more space than they need. In order to save money, these businesses will consider a commercial lease assignment or subletting the extra space. Both options have pros and cons, but the first step is examining the current lease in order to figure out whether there are any restrictions on assignment or subletting.
Commercial leases are contracts and, as such, are subject to their terms. Thus, the language of the lease will dictate whether or not the tenant is able to assign the lease to someone else or sublet the space.
If a lease doesn't contain any rules against assignment or transfer, then a tenant is allowed to assign or sublet. Unless your lease says otherwise, you do not have to get your landlord's consent to sublet or assign your lease.
Businesses might sublet or assign office or retail space to help with costs or to avoid a penalty if they need to end their commercial lease earlier than their contract stipulates. Sometimes, this may be their only option, regardless of their financial position.
When considering your options, you should be aware of the legal differences between assignment and subletting.
There are also several legal and practical aspects to consider when negotiating an assignment or sublease. This includes any legal consequences the tenant may face if the landlord ends the lease.
It is in your best interest to consult an experienced real estate attorney so that you can protect yourself and understand all of your options. Whether you sublet or assign your lease, you will need to find a new tenant. However, there are still differences between the two.
Before subletting or assigning your lease, you should review your lease agreement and talk about your options with your landlord.
It is also important to check your state's laws regarding subleases and assignment because some states require the landlord's consent in order to complete this transfer.
What Happens If I Breach the Lease by Subleasing or Assignment?
Breaching your lease can carry severe consequences, including the following:
- Paying damages to your landlord
- Termination of the lease agreement
What Is an Assignment of Lease?
A lease assignment happens when the tenant transfers all of his or her rights and interest in a lease to another party. Although the new tenant takes on these rights and interests, the assigning tenant is still liable to the landlord.
If the new tenant breaches the lease, the landlord can enforce the terms of the lease on both the new tenant and old tenant. The former, or assigning, tenant is still liable to the landlord according to the original commercial lease agreement.
A lease assignment can also be called:
- A lease transfer
- Assignment agreement
- Assignment of lease
- Lease assignment
Sometimes, a tenant has to leave before their lease is up. In this case, they might be allowed to assign, or transfer, their lease to a new tenant. The old tenant, or assignor, transfers his rights to a new tenant, the assignee.
You can assign both residential and commercial leases. In an assignment, the assignor transfers their lease to a new tenant using a lease assignment agreement. The new tenant then takes the place of the assignor, but the former tenant is still responsible for missed rent checks and damages.
What Does a Lease Assignment Agreement Contain?
A lease assignment agreement is a document that transfers a commercial or residential lease from one party to another. When a tenant needs to break a lease and has a new tenant lined up, they can use a lease assignment agreement.
A lease assignment agreement contains basic information:
- Identifying information
- Assignment start date
- Landlord name
Lease assignment agreements are pretty simple because they reference the original lease. This means that all of the terms in the old lease are automatically included in the new agreement.
A lease assignment agreement transfers the entire lease, whereas sublease agreement does not. Assignments transfer the whole lease from one tenant to another.
The most important thing to know about lease assignment agreements is that they usually need the landlord's permission. If you're considering assigning your lease, you should make absolutely sure that your landlord agrees to the arrangement because you are transferring your lease to a new party.
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