1. Assignment or Subletting
2. Assignment: Entire Interest
3. Sublease: All or Less Than Entire Interest
4. Landlord's Consent
5. Recapture Rights

What is the standard form of office lease? Most leases originate from a landlord's standard form. Then the lease is negotiated between the parties, and modifications are made as a result of the negotiations.

Assignment or Subletting

Unless permitted by the landlord, most leases in big cities clearly prohibit subletting or assignment, whether by transfer of interests of the tenant, operation of law, or otherwise. This includes allowing any part of the premises to be occupied or used for such things as mailing privileges, desk space, or work space.

Assignment: Entire Interest

An assignment of a lease occurs when the original tenant (the assignor) transfers their rights to a sub-tenant (the assignee) to use the leased property. However, the assignor remains liable under the original lease contract unless expressly released by the landlord. There are very few situations in which a tenant would be able to successfully break the obligations of their lease. Among the most common occurrences are:

  • A recapture by the landlord that permits a landlord to terminate the entire lease or a portion of it for the designated space
  • A subletting in which the tenants who rent the property move out and enter into a subsequent tenancy agreement with other people who want to rent the property

According to the laws in laws in New York City, if a landlord arbitrarily withholds consent to subletting or assignment by stating so in the lease, a tenant cannot argue against the landlord's decision or fight the terms of the lease. To clarify, New York City lets the landlord use his discretion in this area.

Sublease: All or Less Than Entire Interest

A sublease, also referred to as a "sublet," occurs when one tenant (the lessee) leases to another (the sublessee or subtenant). The agreement between the landlord (the lessor) and the first lessee remains in effect and sets the terms of the sublease. If the premises are transferred by a sublease for the entire length of the lease, this is referred to as an "assignment." The majority of subleases run for a period that is shorter than the time remaining on the primary lease. Typically, a sublease will end at least one day before the main lease expires.

When a landlord is considering whether to allow an assignment or a subletting, they may restrict specific rights to accomplish certain objectives. This may include:

  • Taking advantages of upswings in the market
  • Controlling how the unused space is used when it might affect the other tenants in the building
  • Maintaining control of the building and the premises

If a landlord agrees to allow an assignment or a sublet of a lease, then a few stipulations may occur. First, the landlord cannot withhold consent on any economic grounds. Second, if the property is in New York, then the landlord is restricted to certain objective criteria.

Most landlords will specify the criteria in a multi-page lease. Some of these criteria include:

  • The subtenant's creditworthiness
  • The subtenant's potential use of the premises
  • The character of the subtenant's company
  • The nature of the subtenant's occupancy
  • Restricting tenants against subleasing or assigning a specific number of occupants per floor to prevent overcrowding

These restrictions also apply to the current occupants of the building or any party affiliated with the landlord.

Recapture Rights

The landlord's right to recapture is normally a negotiated right, depending on the terms that were agreed upon. For each lease, a tenant's request for the landlord's consent to an assignment or sublease is the most common event that may trigger the landlord's right to recapture all or a portion of the premises.

A provision in a lease agreement mandates that a description of the transaction needs to be included when a landlord maintains a right of first offer. The subtenant or proposed assignee should be included in the details. In a right of first refusal situation, in order to trigger the recapture rights or consent, the landlord needs to deliver the sublease or assignment. Various recapture rights may be imposed by the landlord, such as:

  • Taking an assignment of the lease
  • Terminating the lease
  • Preserving the allowance to sublet the area proposed for sublease

Frequently asked questions include:

  • Who is responsible for the construction costs in a partial recapture?
  • Will the rent be adjusted?
  • What responsibilities will the assignee, subtenant, or landlord have regarding the recaptured area?

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