what is a consent to assignment of lease

Assignment of Lease: How It Works and Parties Involved

Jump to section, what is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

Get Help with an Assignment of Lease

Do you have any questions about a lease assignment and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from real estate lawyers who specialize in lease assignment.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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I’m planning on leasing land from a church. Putting a gym on the property. And leasing it back to the school.

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Demystifying Assignment of Lease: Your Go-To Guide

LegalGPS : July 25, 2024 at 12:20 PM

When you’re talking about property leasing, it’s important to understand that there are a lot of terms and concepts that you may have never heard before. One of them is the assignment of lease, which refers to a situation where a tenant transfers their rights and responsibilities under the lease agreement to another party.

Assignment of Lease Template

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What is an Assignment of Lease, and why is it so crucial?

An Assignment of Lease is a term you may have heard thrown around, especially if you're involved in rental properties. It’s a pretty important document. But what exactly is it? Well, in simple terms, an Assignment of Lease is an agreement where the original tenant of a property transfers their leases and all of its rights and obligations to a new tenant. Now, you might be wondering, "When would this scenario ever occur?"

Let's imagine you're a tenant who signed a three-year lease for an office space. However, two years in, you need to relocate due to unprecedented growth of your business. Instead of breaking the lease, you might choose to assign your lease to another business looking for office space. This means that you, as the original tenant, no longer have any obligations under the lease. The new tenant is now responsible for paying rent and complying with all of the terms of the previously signed agreement.

Now that you understand, let's get into the step-to-step guide on how to create an Assignment of Lease!

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Steps to Write an Assignment of Lease

Creating a thorough Assignment of Lease agreement doesn't need to be an overwhelming task. Simply follow these steps to ensure your agreement is both comprehensive and legally binding:

Step 1: Identify the Parties

The information of each party should be included. For the existing tenant (the assignor), make sure to include:

Full legal name or business name

Postal mailing address

Phone number and email address

Do the same for the new tenant (the assignee). Make sure all the information is up-to-date and accurate to avoid any unnecessary confusion or disputes. For example, if the assignor is a business, make sure they have updated their mailing address with the post office to reflect their new building location. If a party has multiple addresses, be sure to list them all.

Step 2: Specify the Lease

This section requires exact information from the original lease agreement, including:

Property address and description

Lease start and end date

A reference to the original lease agreement (for instance, a sentence like "the lease agreement dated...")

Remember to include a copy of the original lease as an attachment to ensure the assignee understands the terms they're adhering to. If not already included in the original lease agreement, be sure to add the following information: Description of rental property, Lease term (how long the lease is good for), Rent amount, and Security deposit amount.

Step 3: Detail the Assignment

State that the assignor is transferring all their interests and obligations in the lease to the assignee. Here, write something like:

"The Assignor hereby assigns, transfers, and conveys to the Assignee all of the Assignor's rights, title, and interest in and to the Lease, together with all the Assignor's obligations, liabilities, and duties under the Lease."

This means that the assignor is transferring all of their interests and obligations in the lease to the assignee. This includes any future rent payments, repairs and maintenance responsibilities, notices of default by either party, and so on.

Step 4: Landlord's Consent

Many leases require the landlord's consent to assign the lease. The assignor should request written consent from the landlord and include a clause like:

"The assignment of the lease is not valid unless and until the landlord provides written consent."

This is followed by a place for the landlord to affirm consent by signing or initialing. This is important because the landlord can elect to withhold consent and the assignment will not be valid. If this is the case, you may need to provide additional consideration for your landlord's assent (for example, an increase in rent).

Step 5: Assignee Acceptance

Include a statement in which the new tenant agrees to the assignment and the terms of the lease. It may look like:

"The Assignee hereby accepts this assignment, assumes all duties and responsibilities under the Lease, and agrees to perform all of the Assignor's obligations under the Lease."

You need to do this because the new tenant needs to have an affirmative acceptance of the assignment in order for it to be valid. This is typically done through a letter from the assignee stating that they agree to perform all of your obligations under the lease.

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Step 6: Signature and Date

Every binding legal document needs a date and a signature. Make sure that there is a proper place for the assignor and the assignee to sign and print their names, with a line for the date.

By following these clear, actionable steps, you'll be able to construct an effective Assignment of Lease agreement. Remember, every situation is unique, so adjust the template as necessary, being sure to include all relevant details.

Clear so far? Great! Now, let's focus on the tips to draft a perfect Assignment of Lease.

Tips to Draft a Perfect Assignment of Lease

Accurate Dates: Be sure to include the date when this agreement will take effect. Precision avoids any confusion about durations, when the assignee takes over, or when the assignor's obligations end.

Clear Terms: This document should restate the terms of the original lease. The assignee needs a clear understanding of what they're stepping into. Bit ambiguous? Think of it like this: the assignee should be able to step into the assignor's shoes comfortably.

Specify Rent Terms: Stating the rent amount, due dates, and method of payment in the assignment helps create a record of the agreed-upon rent terms, ensuring no misunderstanding arises in the future.

Specify the Term: The assignment should state how long the new lease lasts. For example, if the original lease is for one year, then the assignee will assume only a one-year term.

Specify Other Conditions: If there are other conditions in place—such as tenant improvements or utility allowances—then specify these too.

An assignment of lease doesn't have to be a formidable task to overcome. With a cautious and considered approach, these documents can be a smooth and seamless part of managing a successful lease transition.

Our contract templates can offer you even more support, empowering you towards crafting an excellent and individualized Assignment of Lease ready for your task. So why not take your next step towards leasing success and check them out today? Click here to get started!

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THE LANDLORD'S PERSPECTIVE: CONSENT TO ASSIGNMENT AND ASSUMPTION OF LEASE

Commercial real estate landlords commonly face this scenario: one of your tenants sends you a letter indicating that it has sold its business to a third party and has assigned the lease to the third party. Your tenant’s letter requests that you countersign and return the letter acknowledging your consent to the assignment of the lease to the third party. What should you do in response to the tenant’s request?

Step One : Evaluate the lease to determine the landlord’s and tenant’s rights and obligations concerning an assignment of the lease by the tenant. Most landlord-oriented lease forms provide that the tenant shall not have the right to assign the lease (or sublet any part of the premises) without the prior written consent of the landlord. Such lease forms also usually provide that the landlord’s consent shall not be unreasonably withheld. Although reasonableness standards for consents are frequently subject to differences of opinion, most authorities would not consider a landlord to be acting unreasonably if there is any uncured default of tenant or the proposed assignee is either an entity with which the landlord is already in negotiation for other space. The landlord may also reasonably withhold if the lease would subject the premises to a use that would involve increased personnel or wear upon the building, violate any exclusive right granted to another tenant, require modification of the building in order to comply with building code or other governmental requirements or violate the permitted use clause in the lease.

Most leases will require that the tenant notify the landlord prior to the commencement date of the assignment. The tenant must also identify the name of the proposed assignee, the relevant terms of the assignment and copies of financial reports and other relevant information. Additionally, most landlord-oriented leases provide that changes in control of the tenant entity are regarded as an assignment of the lease (and, therefore, trigger the assignment provisions of the lease).

Also, consider these questions. Does the lease specify whether the assigning tenant will remain directly and primarily responsible and liable for the payment of the rent and for compliance with all of its other obligations under the lease? Does the lease provide landlord with an option to terminate the lease or otherwise recapture the premises upon a request to assign the lease? If the landlord does not elect to terminate the lease or recapture the premises, does the lease provide the landlord with any rights to receive any additional rent or other consideration if the assignee is scheduled to pay rent to the original tenant (assignor) in excess of the amount of rent scheduled to be paid by the original tenant to the landlord pursuant to the lease? Does the lease require the tenant to pay to the landlord an assignment fee and/or require the tenant to reimburse the landlord for the landlord’s costs and expenses in investigating and considering any proposed or purported assignment of the lease?

Step Two : Verify whether any third parties have rights with respect to consenting to a prospective assignment of a lease and make sure to comply with such requirements, if any. Occasionally, mortgage loan-related documents or certain easements, covenants, conditions or development agreements burdening the subject property will limit rights to assign leases and/or provide to the mortgage holder consent to assignment rights in certain circumstances. Avoid inadvertently triggering a default with any third party by failing to comply with any such requirements.

Step Three : Evaluate the proposed form of Assignment and Assumption of Lease and modify as necessary. Assuming the landlord has reviewed and approved the financial reports and other relevant information concerning the proposed assignee and is not planning to exercise any termination or recapture right, under most circumstances, the landlord will be well served to modify the assignor’s/assignee’s form of Assignment and Assumption of Lease.

Most landlords will want an Assignment of Lease to include the effective date of the assignment; a comprehensive list of the underlying lease agreements and the parties; and an assignment clause describing the parties, what is being assigned and the consideration given. The Assignment will also cover a statement confirming that the assignor agrees to pay landlord a fee for the landlord’s review of the proposed assignment to assignee; representations by the assignor to landlord that the landlord is not in default under the lease, the assignor is receiving no “increased rent” from assignee that exceeds the rent payable to landlord for the premises, the assignor has no claims against landlord under the lease, and each person signing the assignment on behalf of the assignor has full authority and that the assignment binds the assignor entity; a landlord limitation of liability clause; and an accurate signature block for the assignor entity.

— Jay A. Gitles is a partner in the Real Estate Practice Group of Seyfarth Shaw LLP's Chicago office.

On Monday: Part II of “The Landlord's Perspective,” which includes the last step and a sample conesnt to assignment and assumption of lease clause.

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Assignment and Consent Standards in Commercial Leases

Mar 6, 2020

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. This article presents a brief overview of the assignment provision in commercial leases, both office and retail.

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. When a tenant’s interest in a lease is assigned, the tenant is transferring its entire leasehold interest and 100% of the leased premises to a third party for the entire remaining term of the lease. For the tenant, the assignment provision represents a potential exit strategy, dependent of course on the local market, and increased flexibility for future needs. For the landlord, the assignment offers greater security for its revenue stream and hopefully the avoidance of a tenant bankruptcy or default while keeping its building occupied. The tenant’s desire for flexibility and the landlord’s need for control is where the negotiations are focused. This article presents a brief overview of the assignment provision in commercial leases, both office and retail, with particular attention on the laws of Maryland, Virginia and the District of Columbia. The landlord’s standard for providing consent to a request to an assignment will be reviewed, and we will conclude by offering suggested language.

What If The Lease Does Not Contain An Assignment Provision?

The law traditionally favors the free alienation of property. Therefore, under the laws of almost every state, if the lease is silent on whether the landlord’s consent to an assignment is required, then the commercial tenant has the right to assign its interest. This is true in Maryland, Virginia and the District of Columbia. Given this baseline, almost every lease form will have a detailed provision setting forth the assignment process. Note also, however, that in most states it is also enforceable for a commercial lease to have an outright prohibition against assignments. Such a provision would likely be a non-starting deal point for most sophisticated tenants.

What Does Reasonable Mean?

If a lease simply provides that the tenant requires landlord’s consent to an assignment, but does not include the standard for giving or withholding that consent, then in many states the implied standard is that the landlord’s consent may not be unreasonably withheld. Historically this was the minority view, with the historical rule allowing the landlord to withhold consent for any reason. The implied duty of reasonableness is now more the norm as more states adopt this position when presented with the issue. There is express case law establishing this rule in Maryland, and most courts in Virginia and Washington, DC will imply such a covenant of good faith and fair dealing. Most states, though, do allow a landlord the sole right to grant or withhold its consent if the lease clearly expressly provides, and in Maryland the lease must specifically state that the landlord’s consent may be granted or withheld in the sole and absolute subjective discretion of the landlord. Again though, a sophisticated tenant with any leverage should never agree to such a provision.

Most negotiated leases will instead contain a provision requiring that landlord’s consent to an assignment is required, but such consent will not be unreasonably withheld. The tenant will likely also try to include landlord’s obligation to not unreasonably delay or condition its consent. A short clause without further defining what constitutes “reasonableness” generally favors the tenant, and landlords typically prefer including specific standards as to the criteria it can consider when reasonably deciding whether or not to consent to an assignment. Without such specificity, defining “reasonable” is difficult as the landlord and tenant clearly will have differing viewpoints and it may be left as a factual question to be decided in litigation. The typical definition (set forth in the Restatement (Second) of Property) would be that of a reasonably prudent person in the landlord’s position exercising reasonable commercial responsibility.

Absent a detailed provision listing the criteria a landlord can consider when reasonably reviewing a request to assign, a landlord is typically found to be considered reasonable if it considers certain general broad factors. First, the landlord reviews the assignee’s proposed use. In a retail setting, the landlord will be concerned whether the proposed use fits with the existing center and/or violates any existing exclusives or insurance requirements. In an office setting, the landlord might review the expected traffic and wear and tear on the building. Second, the landlord will consider the creditworthiness of the assignee. The landlord (and the assignor) will want to be confident that the assignee is capable of performing tenant’s obligations under the lease and a large creditworthy tenant increases the value of the asset. The assignor might argue that a strict financial test (such as a minimum net worth, for example) is unfair since the assignor is likely not being released upon the assignment and the landlord can still pursue the assignor in the event of a default. Third, the landlord will review the experience and history of the assignor. As mentioned above, landlords instead prefer a detailed list setting forth the many factors that they can include as part of reasonably reviewing a request for a lease assignment.

Without further establishing the criteria, the landlord puts itself at risk of a challenge by the tenant that a denial of a consent is unreasonable.

In defining “reasonable,” courts typically do not allow a landlord to deny or condition consent to an assignment based purely on economic reasons where the landlord results in substantially increasing what it was entitled to under the lease. In Washington, DC, there is well established case law holding that it is unreasonable for a landlord to withhold consent solely to extract an economic concession or improve its economic position. For example, a court would not consider it reasonable for a landlord to condition its consent on the assignee paying a greatly increased rent. Instead, as discussed below, landlords should look to protect their interests in a market of increasing rents by providing for either the sharing of excess rentals or a right to recapture.

What Are Typical Provisions In an Assignment Clause?

As discussed above, tenants generally prefer a short assignment provision simply requiring the landlord to not unreasonably withhold, condition or delay its consent to an assignment. But most leases are drafted by landlords, and over the years the assignment provisions have evolved to contain many typical provisions in addition to further defining “reasonableness,” including the following below.

• Sharing of Excess Rents. Since many states do not permit a landlord to condition its consent on improving its economic position (e. g. , by increasing the rent), most leases instead contain a provision where the landlord is entitled to all or a portion of the profits. The profits may mean increased rent, or it may even be construed more broadly to consider the value of the location in a sale of the tenant’s business. The landlord’s argument is that it doesn’t want the tenants competing in the real estate market. The tenant should push back here, and certainly try to lower the percentage shared, carve out any consideration received in the sale of tenant’s business, and only share profits after all of the tenant’s reasonable costs incurred in connection with the assignment were first deducted.
• Corporate Transfers. Since a purchase of the entity constituting tenant is likely not deemed an assignment under the law, most leases make clear that any such corporate sale, including the sale of either a controlling interest in the stock or substantially all of the assets of the tenant, is deemed an assignment for purposes of the lease. The tenant should carve out permitted transfers for typical mergers and acquisitions under certain conditions, and also carve out routine transfers of stock (or other ownership interests) between existing partners or for estate planning purposes. The landlord will likely accept a permitted transfer concept provided they receive adequate notice and the successor entity succeeds to all of the assets of the original tenant with an acceptable net worth.
• Assignment Review Fee. Most landlords include in their form lease the requirement that the tenant reimburse them for legal and administrative expenses incurred in reviewing the request for consent and preparing the assignment. The tenant clearly wants to keep these fees reasonable and in keeping with the local market.
• Recapture Rights. Landlords like to include the express right to recapture the premises in the event the tenant comes to it to request a consent for an assignment. A recapture clause allows the landlord to terminate the lease if market rents have increased or if it needs the space for another use. Sophisticated tenants should push back here as much as leverage allows, try to limit the time periods, and if nothing else try for the right to nullify the recapture by rescinding its request for the consent.
• Tenant’s Remedy. To protect themselves from claims for damages from the tenant if the landlord withholds its consent to a requested assignment, landlords often include a provision where the tenant waives its rights to monetary damages in such a situation and can only seek injunctive relief. The tenant should try to delete this provision, or at least, if leverage permits, provide for the right to seek damages if the landlord is subsequently found to have acted in bad faith.

Assignment provisions are heavily negotiated and both the commercial landlord and tenant need to be advised to the applicable local law and know the market for a comparable transaction. ( Note: The author represents office and retail landlords and tenants throughout Virginia, Maryland and the District of Columbia.) Sample reasonableness provisions for both office and retail uses are copied below for reference.

Retail Lease

Landlord and Tenant agree, by way of example and without limitation, that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (i) In Landlord’s reasonable business judgment, the proposed assignee lacks sufficient business experience to operate a business of the type permitted under this Lease and to a quality required under this Lease; (ii) The present net worth of the proposed assignee is lower than that of Tenant’s as of either the date of the proposed assignment or the date of this Lease; (iii) The proposed assignment would require alterations to the Premises affecting the Building’s systems or structure; (iv) The proposed assignment would require modification to the terms of this Lease, or would breach any covenant of Landlord in any other lease, insurance policy, financing agreement or other agreement relating to the Shopping Center, including, without limitation, covenants respecting radius, location, use and/or exclusivity; (v) The proposed assignment would conflict with the primary use of any existing tenant in the Shopping Center or any recorded instrument to which the Shopping Center is bound; and/or (vi) The proposed assignment or subletting would result in a reduction in the Rent collected by Landlord during any portion of the term of this Lease.

Office Lease

Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building; (ii) The Transferee intends to use the Premises for purposes which are not permitted under this Lease; (iii) The Transferee is a governmental agency; (iv) The Transfer occurs prior to the first anniversary of the Lease Commencement Date; (v) The Transferee has a net worth of less than $10,000,000.00; (vi) The proposed Transfer would cause a violation or trigger a termination right of another lease for space in the Building; or (vii) Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, or (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice.

Reprinted with permission from the March edition of the Commercial Leasing Law & Strategy© 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected] .

• John G. Kelly

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Consent to Assignment: Everything You Need to Know

Consent to assignment refers to allowing a party of a contract (the assignor) to assign a contract and move the obligations to another party (the assignee). 3 min read updated on September 19, 2022

Consent to assignment refers to allowing a party of a contract to assign a contract and move the obligations to another party. The party of the existing contract, known as the assignor, will pass on the contract to another party, known as the assignee. The goal is for the assignee to take over the rights and obligations of the contract. For a contract to be assigned, the other party must be aware of what is happening.

Contract Assignments

The assignment of a contract differs depending on the type of contract and the language in the original agreement. Some contracts contain a clause that doesn't allow assignment at all, while other contracts have clauses that require the other party to consent before assignment can be finalized.

Consider the following scenario. A business owner contracts with a computer company to have a processor delivered every time a new model is released. The computer company assigns the business owner's contract to another provider. As long as the business owner is aware of the changes and still receives the processors as scheduled, his contract is now with the new computer company.

However, assigning a contract doesn't always exempt the assignor from their duties and responsibilities. Some contracts include a clause that states that even if the agreement is assigned to another party, the original parties guarantee that the terms of the contract will be fulfilled.

Unenforceable Assignments

There are a number of situations where a contract assignment won't be enforced , including:

• The contract has an anti-assignment clause that can stop or invalidate any assignments.
• The assignment changes the nature of the contract. An assignment that changes what is expected or impacts the performance of the contract isn't allowed. This also applies if the assignment lowers the value one party will receive or adds risk to the deal that the other party didn't originally agree to.
• The assignment is against the law. In some cases, laws or public policies don't allow assignment. Many states forbid employees to assign future wages. The federal government doesn't allow the assignment of particular claims against the government. Some assignments violate public policy. For example, a personal injury claim cannot be assigned because it could lead to litigation against a party who was not responsible for the injury.

Delegation vs. Assignment

It is common for a party to sign a contract and have someone else actually fulfill his duties and do the work required by the contract. However, some contracts can't be delegated, such as when a party agrees to service done by a particular person or company. If a company contracted with Oprah Winfrey to be a keynote speaker, Oprah wouldn't be permitted to delegate her performance duties to anyone else.

If both parties agree that the work can't be delegated, they should include specific language in the original contract. This can be as simple as a clause that states, “Neither party shall delegate or assign its rights.” Both parties should agree to this clause.

How to Assign a Contract

Assigning a contract is a three-step process. First, check to see if the contract has an anti-assignment clause or if there are limitations around assignments. Sometimes clauses are straightforward with language like, “This agreement may not be assigned,” and while other times, the language is less obvious and hidden in another clause. If there is language in the contract that states it can't be assigned, the other party must consent to an assignment before you can proceed.

Second, the parties must execute an assignment . Create an agreement that transfers the rights and obligations of one party to the assignee.

Third, notify the other party of the contract. Once the contract rights have been assigned to the new party, you should notify the other party of the original contract. Providing written notice removes you from being responsible for any part of the contract unless there is language in the contract that says differently or the assignment is illegal.

Anti-Assignment Clause

As you are negotiating and writing a contract, consider whether you want the contract to be able to be assigned. If you don't want assignment to be a legally viable option, that needs to be clearly stated in the contract.

If you need help with consent to assignment, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Let's Be Reasonable: Landlord Consents to Lease Assignment

What sort of things go through a commercial landlord's mind when receiving a notice from its tenant that the tenant wants consent to assign its lease? The answer is, all sorts of things. The landlord may want the space surrendered so it can re-lease it at a higher rental rate. The landlord may doubt the ability of the proposed assignee to perform the obligations under the lease. The landlord may be contemplating demolition and redevelopment and see an opportunity to amend the lease by adding a demolition clause. The landlord may want to use the consent as an opportunity to extract a fee or other benefit from the tenant. The landlord may simply not like the type of business that the proposed assignee wants to conduct on the premises.

The challenge for the landlord, however, is that the law does not allow landlords to take into consideration all sorts of things when exercising its discretion in granting consent. The law requires that the landlord act reasonably in exercising its discretion.

A standard provision of commercial leases is the requirement for tenants to obtain landlord consent to an assignment of the lease. To protect tenants from a potential power imbalance between the landlord and the tenant, these provisions often specify that the landlord may not unreasonably withhold its consent. Even if this protection is not included in the lease, the Commercial Tenancies Act (Ontario) 1 (the Act) deems this language included in all commercial leases absent an express provision to the contrary.

But what does unreasonably withholding consent look like? This is not defined in the Act. Accordingly, ordinary meaning and the common law are used to fill in the gaps.

Recently in 2023, the Ontario Court of Appeal in Rabin v 2490918 Ontario Inc. 2 provided guidance by affirming the applicable principles for determining whether a landlord acted reasonably in withholding its consent:

• "The burden is on the tenant to satisfy the court that the refusal to consent was unreasonable.
• It is the information available to—and the reasons given by—the landlord at the time of the refusal—and not any additional, or different, facts or reasons provided subsequently to the court—that is material.
• The question must be considered in the light of the existing provisions of the lease that define and delimit the subject matter of the assignment as well as the right of the tenant to assign and that of the landlord to withhold consent.
• A probability that the proposed assignee will default in its obligations under the lease may, depending upon the circumstances, be reasonable ground for withholding consent.
• The financial position of the assignee may be a relevant consideration.
• The question of reasonableness is essentially one of fact to be determined on the circumstances of each case, including the commercial realities of the marketplace and the economic impact of the assignment on the landlord.

These factors are considered within the context of the "reasonable person" standard" 3 . That is, what would a reasonable person have done in the same circumstances. 4

Applying these principles to the facts in front of the court, Justice Roberts held that the tenant had met its burden and that the landlord had unreasonably withheld its consent to the tenant's requested lease assignment.

Facts of the Case

Looking at the facts of the case, Dr. Rabin was a 70 year old dentist who had been a tenant of the building since around 1977. The landlord had acquired the building in 2017 with the ultimate intention of demolishing the building and redeveloping the property. The lease in question was set to expire at the end of 2025, with a five-year option to renew.

Dr. Rabin wanted to semi-retire and sell his practice to two younger dentists. To facilitate this transaction he sought the landlord's consent to assign the lease under article 11.1 of the lease, which provided that the tenant could not assign the lease without landlord consent "which consent shall not be unreasonably withheld, subject to the provisions of Section 11.1(a)."

Section 11.1(a) required the tenant to provide the landlord written notice of the intent to assign, specifying the name of the proposed transferee, as well as any credit, financial or business information with respect to the transferee that the landlord required. The landlord then had 15 days to notify the tenant of its decision to consent or not.

Prior to formally requesting the assignment in writing, the tenant texted the landlord advising him of his intention to sell his practice and assign the lease, as well as offering any information on the purchaser that the landlord required. Two months later, the tenant provided the landlord with the requisite formal written notice of the assignment and requested the landlord's consent. The landlord did not respond to the tenant within the requisite 15 day period.

The landlord's real estate lawyer responded to a subsequent request by the tenant's lawyer 22 days after the tenant's initial request for consent, indicating consent would be given if the new principal provided his personal guarantee, the existing principal continue with his personal guarantee and that the lease be modified to include a demolition clause upon 24 months' notice. The tenant rejected this proposal.

Further correspondence was exchanged between the parties including the landlord's lawyer sending a short email more than a month after the initial request indicating that the consent to assignment was denied and subsequently requesting an extensive list of documents and information from the tenant. By then the tenant had commenced an application under subsection 23(2) of the Act to determine whether the landlord's consent had been unreasonably withheld.

Ontario Superior Court Decision

While critical of both sides, the application judge ultimately held that (1) the tenant had waived the 15-day requirement under article 11.1(a) of the lease, and (2) that the tenant had failed to establish that the landlord had either refused to consent to the assignment or unreasonably withheld its consent to the assignment. The tenant's application was, accordingly, dismissed with the tenant then appealing the decision to the Ontario Court of Appeal.

Ontario Court of Appeal Decision

Dismissing the first holding, as neither party raised the doctrine of waiver, Justice Roberts then applied the principles, as set out above, to the facts before her to determine whether the landlord's consent was unreasonably withheld.

To start, the court held that the application judge erred by failing to find that the landlord's failure to respond to the tenants request within the 15 day period amounted to neglect and an unreasonable withholding of consent. To support this conclusion, the court noted that the landlord provided no reasonable excuse for his failure, having been aware two months prior to the formal requisition of the forthcoming request, and admitting having read the assignment clause and speaking to his lawyer during the 15 day period.

While this neglect to consent within the time limit was held to amount to an unreasonable withholding of consent and, therefore, was sufficient to dispose of the case, the court continued. In its further analysis, the court held that the landlord's lawyer's email denying the consent to the lease assignment also amounted to an unreasonable refusal of consent, as did requesting additional information regarding the proposed assignee well after the 15-day deadline.

Lastly, the request to insert a demolition clause was likewise held to amount to an unreasonable withholding of consent, the court noting that it is well established that a landlord attempting to obtain an amendment to a lease for its benefit in exchange for providing consent is unreasonable. "A conditional consent, is not a consent." 5

Accordingly, the appeal was allowed with the court ordering the consent of the landlord to be given, thereby permitting the assignment of the lease.

Conclusion and Key Takeaways

Rabin v 2490918 Ontario Inc . provides a needed reminder about what is considered unreasonable withholding of consent for the purposes of Section 23 of the Act. While the decision ultimately hinges on the specific facts of each case, the principles affirmed in Rabin v 2490918 Ontario Inc . provide a framework for analyzing these facts.

More broadly, this case also provides certain cautions to landlords including that:

• failure to deliver a timely response may itself lead to a finding that the landlord has been unreasonable; and
• consent conditional on obtaining a gain from the tenant is not a consent and can, similarly, lead to a finding that consent was unreasonably withheld.

At the end of the day, a surprising amount of common sense dictates how a landlord should act when exercising its discretion in these circumstances. They must act reasonably … they must act in a timely manner … and they must exercise their discretion having regard to the purpose for which that discretion was granted in the lease .

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Assignment Of A Lease: Everything You Need To Know! 📃

The assignment of a lease is a legal process that allows a tenant to transfer or “sell” their lease to another party. This can be a complex process, but understanding the steps involved can help make it easier. Whether you are a landlord, tenant or prospective lease buyer or “assignee”, this guide will provide you with the information you will need to navigate the assignment of a lease.

As an existing leaseholder or commercial tenant, there are plenty of reasons why you might want to exit your business lease early. Perhaps your current premises are no longer suitable for the needs of your growing business, or maybe your business is in financial difficulty, and you need to find a lease with more favourable terms.

There are also a range of options when it comes to deciding how to exit a lease or change the occupational status of a property before the specified lease term end date.

Some of the most common include:

• Assignment of a lease, which involves selling or passing the existing lease (and remainder of the lease term) onto another party or business, who assume the role of occupational tenant;
• Terminating the lease by exercising a break option (either a rolling break option or termination of the lease on a fixed break date) by serving a formal notice on your landlord in accordance with the break clause of your lease; or
• Subletting your premises or a permitted part (with the prior consent of your direct landlord) and adopting the role of intermediate landlord yourself.

Unfortunately, exiting a lease early is not always a simple process and can be costly. A lease is a legal contract, with binding provisions and if you breach its terms, your landlord could take you to Court, sue you for damages, take remedial action and/or forfeit the lease and take back possession of the premises, depending on the nature and extent of the breach in question. Opting to pursue a process such as assigning the lease to a new tenant can make exiting a lease early possible in theory, but there are many factors that should be considered before beginning this process.

If you are thinking of trying to leave your lease early, it is advisable to obtain independent legal advice from an appropriately experienced commercial property solicitor before taking any action.

If you require legal advice or assistance on getting out of a commercial lease please call us on 0800 086 2929 , email [email protected] or complete our Free Online Enquiry Form .

In addition to office meetings, we also offer remote meetings via telephone and video conferencing software so can assist you wherever you are based.

What is assignment of a lease?

The process of assignment of a lease is essentially selling the lease to a third party (the “assignee”).

If you are a commercial property tenant, your lease likely contains a clause that would in principle allow you to assign your lease to a new tenant, subject to receiving your landlord’s prior approval and further subject to complying with certain conditions; these would usually be set out in your lease and commonly involve any number of the following:

• You as outgoing tenant providing an Authorised Guarantee Agreement (or AGA) for New Leases (post-1995), if it is reasonable in the circumstances to provide one, by way of a guarantee of the new tenant’s (assignee’s) payment of the lease rents and performance of the lease covenants going forward; and/or
• Provision of a Guarantor of requisite standing from the incoming tenant (assignee), being an individual, Director or Company, dependent on the landlord’s specific requirements; and/or
• Provision of a Rent Deposit (commonly equivalent to 3-6 months’ worth of the annual rent prescribed by the existing lease) for the landlord to hold as security; and/or
• Modern leases usually reserve a right in addition for the landlord to impose any further conditions that would be reasonable in the circumstances. Your landlord will expect this new tenant to meet the same expectations they originally set for you, and you will probably need the landlord (or indeed superior landlord’s) consent in writing before the assignment can be completed. The process for obtaining the landlord’s consent to the arrangement usually involves providing references for the proposed assignee, evidence of their financial viability and ability to comply with the lease covenants, payment of the landlord’s legal or other professional costs (e.g those of their surveyor) and the landlord being joined to a formal Licence to Assign, which would document their consent to your proposed assignment.

Whilst  your landlord is usually obliged not to  unreasonably withhold or delay their response to your application or their consent to  the proposed assignment, they are not guaranteed to provide consent and are under no obligation to give their consent if the new tenant does not  meet their standards or in the event that you cannot sufficiently evidence the proposed assignee’s ability to pay the rent(s) and comply with and perform the tenant covenants set out in your lease – so it would be  wise to be fully informed and selective  regarding the nature and identity of the proposed assignee and confident in their status and ability, in advance of you approaching your landlord with your application .

There are likely to be restrictions regarding if and when you can assign your lease, specified within the provisions of the lease document. Some common restrictions include not allowing lease assignments of part only of the premises (as opposed to the whole), if the term  is for a short period only, and not allowing the lease to be assigned if the lease would be due to end imminently, or indeed if there is a material ongoing breach of the lease terms, such as allowing the property to fall into disrepair or significant rent arrears.

Once a lease has been assigned, the assignee will become the new tenant and will be responsible for payment of the lease rent(s) and ensuring compliance with all of the tenant’s obligations in the lease, including covenants in relation to repair and maintenance of the property.

What checks will a landlord make before permitting assignment of a lease?

Before consenting to the assignment of a lease to a new tenant, your landlord will want to carry out checks to ensure the tenant you have found is a suitable replacement tenant. These checks can include:

Financial status

Your landlord will want to see evidence – usually in the form of business bank account statements – that the new tenant is an active registered company in a strong financial position.

Statements from previous landlords that the tenant has leased property from, trade references from suppliers or other professional references (for example their accountants or banking manager) will be required to show that the tenant is reliable and doesn’t have a history of missing payments or otherwise neglecting their responsibilities as a tenant or business client.

Proposed use of the premises

Your landlord will probably be looking for a new tenant to intend to use the premises in broadly the same way as you have done in the past as the lease will specify what use is permitted and if there are any restrictions on usage.

If the use of the premises is to be altered or updated it is imperative that a change of use application is made to the landlord and to the extent necessary, the local authority or planning authority. Proper consents or planning permission(s) are to be sought in advance from the local or planning authority and if approved and required, a lease variation reflecting the change of use documented in writing; for example, these provisions could form part of the Licence to Assign, to which the landlord would be joined as a party.

Likelihood of requesting alterations to the building

Your landlord will require advance notice of any alterations or fitting out works the new tenant may wish to make at the premises, and in some cases written permission in the form of a Licence to Alter, setting out plans, specifications and method statements will be required; so it would be good to have these documents prepared in readiness, for the landlord to approve. It is likely that a landlord could withhold their consent for assigning the lease to any tenant intending to make large-scale or structural changes to a property, or those that would adversely impact the energy efficiency of the property (or building of which it forms part)  and especially if the proposed plans vary significantly from the remit of alterations that are generally permitted in principle under the existing lease.

What liabilities will you have when assigning a lease?

It is important to recognise that the assignment of a lease to a new tenant does not automatically exempt you from all liabilities related to that tenancy and the property going forwards. In fact, once the lease assignment is complete you can still be liable should the new tenant miss any payments or otherwise breach the terms of the lease.

The nature and extent of what you could be held liable for depends on when your lease first began. If you entered your lease before 1 st January 1996 (Old Leases) you, as original tenant, will remain liable for all payments due under the lease and performance of the lease covenants for the duration of the lease term including from any subsequent tenants– even if you no longer occupy the property and if the lease is assigned several more times after you. This doctrine is known as “privity of contract” and is usually dealt with by subsequent tenants entering into an express indemnity covenant with the original/former tenant, establishing a chain of indemnity covenants, where there are a series of subsequent lease assignments

For “New Leases” that were entered into after 1 st January 1996, the Landlord and Tenant (Covenants) Act 1995 applies and for such modern leases, as outgoing tenant you would (if reasonably required in the circumstances) be required to sign an Authorised Guarantee Agreement (AGA). This means you would guarantee rental payments and compliance with the tenant covenants of the lease for the next tenant (your assignee and direct successor), but not any further tenants. An AGA may also provide the landlord with the option to require you to take on a new lease (on the existing terms) or pay the landlord a lump sum, often equivalent to 6 months’ worth of the annual rent.

What does lease assignment cost?

On the other hand, if the rent under the new lease is below the market rate, the new tenant may instead want to pay you a premium. These are commercial terms that a local valuation agent or surveyor would be best placed to provide you with input on.

It is highly recommended to involve your solicitor (and consider the cost of their advice) when opting to pursue a lease assignment, so as not to inadvertently break the terms of your lease and potentially leave yourself open to court action or forfeiture of your lease, from your landlord. You may also be required to cover your landlord’s legal costs and other professional fees (e.g. the fees of their agents and/or surveyors) in consideration of your application for lease assignment.

How to get out of a commercial lease – what are the alternatives?

Assignment of a lease is not the only way to exit a commercial lease and depending on your circumstances, the provisions of your lease and in the context of your professional relationship with your current landlord, it may not always be the best commercial option for you.

Some alternative ways to get out of a commercial lease early include:

Exercising a break option

Some leases incorporate a “break clause” or early “break option” which offers one party or both parties the opportunity to end the lease early in certain circumstances. Read your lease carefully to check if it contains a clause such as this, and if it does, what terms and conditions are involved, for example do you have the benefit of a rolling break option or is a fixed break date specified? Any time limits specified in the lease, provisions for giving of notice and compliance with any conditions must be strictly followed, in order for the break option to be valid. It is worth mentioning that business leases benefiting from the protection of the security of tenure provisions of the Landlord and Tenant Act 1954 cannot contain a break option for the landlord.

Negotiating a lease exit and surrender

If your contract does not include a break clause, your landlord may still be open to you exiting the lease early by way of lease surrender, subject to payment of a lump sum, as consideration. You would need to negotiate the specific terms of your exit and your landlord may require a pay-out to offset the inconvenience of having to market the property again, their loss of guaranteed rental income and to cover any dilapidations. You would enter a formal Deed of Surrender with the landlord.

Compared to lease assignment, negotiating an exit from your lease should provide a clean break with no further liabilities, but we would recommend seeking legal advice to confirm that you were exiting the contract cleanly.

Subletting the premises

A final option to consider when looking at how to exit your commercial lease early is subletting. If your contract allows it, you can take on the role of intermediate landlord by finding and leasing your property to a new subtenant.

You can use the rental income received from your new direct tenant to cover your own superior lease rent payments and obligations, but in return you would be expected to take an active role managing the property and deal with the sub-tenant directly, ensuring they comply with any superior covenants and requirements of the landlord and you would be required to promptly arrange remediation of any breaches.

You will need to comply with the provisions of your existing lease with regard to subletting which would usually include obtaining your direct landlord’s prior written consent to the arrangement, payment of their legal and/or other professional fees (e.g. surveyors costs), seeking their approval of the form of sublease and entering into a Licence to Sublet.

Need assistance with assignment of lease?

Exiting a lease early can be a complex process, whether you choose to do so by arranging the assignment of your lease or by one of the other means mentioned above.

Lease assignment is an effective way for tenants to exit a commercial lease early. However, this can be a slow process and you will incur costs.

Contacting a solicitor at an early juncture is advisable so that you are appropriately advised at the outset of any key considerations and potential pitfalls. For example, even though you are selling the lease, you could potentially remain liable afterwards; dependent on the age of the lease and whether or not you have entered into an AGA.

Gurkiran Notay is a Senior Associate in our Commercial Property Department and has a wealth of experience in dealing with commercial lease assignments.  She assists and advises clients across the UK.  In addition to office meetings in Elstead, Surrey, Gurkiran offers remote meetings via telephone or video conferencing software so would be pleased to assist you wherever you are based.

Make a Free Enquiry

If you are considering how to get out of a commercial lease or have any queries relating to any of the issues discussed in this article, please get in touch with our of our experienced property lawyers by calling 0800 086 2929 , emailing [email protected] or completing our Free Online Enquiry Form .

The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified commercial property solicitors such as those within our firm .

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Assigning A Lease – How A Deed Of Assignment Works

When you’re entering or leaving a business premise as a tenant, it’s always good to check if you need to transfer a lease. In other words, if the owner is changing, you need to make this official with your tenant. 

This is known as ‘assigning a lease’ or ‘transferring a lease’. It occurs when you’re selling your business and the buyer agrees to be bound by the existing lease, or you’ve simply decided to move premises and have found another business willing to be bound by your current lease.

Essentially, when you assign your lease, you’ll be handing over the rights and obligations of that lease to another party . The last thing you want is to be liable for an old lease! 

This is also known as a Deed Of Assignment , which we’ve written about in more detail here . 

The Process Of Transferring A Lease

Transferring a lease doesn’t have to be a complicated process, so let’s break it down. 

1. Review The Existing Lease

First thing’s first – you’ll need to ensure that there aren’t any conditions on the lease that would stop it from being transferred. To do this, you might want to look at the terms of your lease, and even have a lawyer help you out with this step! 

2. Landlord’s Consent

Once you’ve determined that the lease is assignable, you’ll need the consent of the landlord in writing and identify what requirements you’ll need to fulfil.This can be different for each landlord, so make sure you and your landlord are both clear on what needs to be done. 

3. Discuss The Assignee

Now, you need to chat with your landlord about who will be taking over your premises, otherwise known as the incoming tenant. For example, you need to collect their name, contact details and relevant documents for the transfer. This might include documents to show their financial status, or their business experience. 

Once this is all taken care of, the landlord basically confirms their consent to the transfer, and the tenant also lets them know that they agree to it. This should be covered in what we call a Deed of Consent to Assignment . 

The assignee will also agree to inherit the rights under the existing lease from a certain date until the lease term ends. 

At this stage, it’s important for all parties to review the terms of the Agreement to ensure they are happy with what they need to do and for how long they will enjoy certain rights or interests in the lease. 

I’m The Outgoing Tenant – What Else Should I Do?

Once the landlord’s consent has been received, we can start putting together a Deed of Transfer of Lease!

This will officially release the tenant from any responsibilities or liabilities under the lease, but until this is official, you want to make sure you uphold your obligations. 

Retail Leases

If you’re transferring a retail lease, the steps you need to take might look a little different. You may want to take a close look at the Retail Leases Act 1994 , as this covers retail leases. 

For example, the following things might be worth considering:

• Under a retail lease, as long as you have provided proof that the incoming tenant has good financial standing, you can force the landlord to provide consent
• However, if the incoming tenant is not financially reliable, the landlord is under no obligation to provide consent

It’s important to understand what you can and can’t do depending on the type of lease you’re under. You can read more about transferring leases here . 

Whether you need one drafted or looked at, we’d love to help! You can reach out to our friendly team on 1800 730 617 or [email protected] for a free, no-obligations consultation about your specific situation and the legal documents that are right for you.

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This residential lease assignment is between , an individual (the " Original Tenant ") and an individual (the " New Tenant ").

On or about , the Original Tenant and (the " Landlord ") entered into a lease agreement (the " Lease ").

The Lease covers the property located at , , , and more particularly described as follows: (the " Premises ").

Under section of the Lease, the Original Tenant is permitted to assign its interest in the Lease, with the consent of the Landlord.

The Original Tenant wishes to assign to the New Tenant's his or her rights in, and delegate all of his or her obligations under, the Lease, and the New Tenant wishes to accept this assignment.

The parties therefore agree as follows:

1. ASSIGNMENT.

The Original Tenant assigns to the New Tenant of all his or her rights in, and delegates to the New Tenant all of his or her obligations under, the Lease. This transfer will become effective as of (the " Effective Date "), and will continue until the present term of the Lease ends.

2. ASSUMPTION OF RIGHTS AND DUTIES.

After the Effective Date, the New Tenant shall assume all rights and duties under the Lease, including the obligation to pay rent under the Lease when it is due.   The Original Tenant will have no further obligations under the Lease   The Original Tenant will remain bound to the Landlord under the Lease, notwithstanding the assignment . However, the Original Tenant remains responsible for obligations accruing before the Effective Date.

3. REIMBURSEMENT.

On or before the Effective Date, the New Tenant shall pay to the Original Tenant, which is the sum of:

• (a)  the security deposit held by the Landlord under the Lease; and
• (b)  the rent or other deposits paid in advance by the Original Tenant for any period after the effective date of this assignment.

4. INDEMNIFICATION.

• (a) The Original Tenant shall indemnify the New Tenant from all damages, liabilities, expenses, claims, or judgments (including interest and reasonable attorneys' fees) (collectively, "Claims" ) arising out of the Original Tenant's failure to perform his or her obligations under the Lease before the Effective Date.
• (b) The New Tenant shall indemnify the Original Tenant from all Claims relating to the Lease, except if those costs arise from the Original Tenant's failure to perform his or her duties under the Lease before the Effective Date.
• (c) The New Tenant shall indemnify the Original Tenant from all Claims attributable to the acts or omissions of the New Tenant or his or her agents, contractors, or employees with respect to the Premises or any activities on the Premises. This indemnification will survive the termination of the Lease and this assignment.

5. CONTINUING EFFECTIVENESS OF LEASE.

This assignment is made on the understanding that all other terms of the Lease remain in full effect, including the prohibition against further assignments and subleases without the Landlord's express written consent.

6. ORIGINAL TENANT'S REPRESENTATIONS.

The Original Tenant represents that he or she:

• (a) has the power and authority to enter into and carry out this assignment;
• (b) has not previously assigned his or her rights under the Lease;
• (c) is the lawful and sole owner of the interests assigned under this assignment;
• (d) the interests assigned under this assignment are free from all encumbrances;
• (e) except for the Landlord and the Original Tenant, there are no parties in possession or occupancy of the Premises or any part of them, and there are no parties with possessory rights on the Premises or any part of them; and
• (f) has performed all obligations and made all required payments under the Lease.

7. CONDITION OF PREMISES.

The New Tenant has examined and inspected the Premises and accepts them "as is" and in its present condition with all faults. Except as provided in this assignment, the Original Tenant makes no representations, covenants, or guaranties about the status, nature, or condition of the Lease or the Premises.

8. INTERPRETATION .

In interpreting the language of this assignment, the parties shall be treated as having drafted this assignment after meaningful negotiations. The language in this assignment will be construed as to its fair meaning and not strictly for or against either party.

9. GOVERNING LAW .

• (a) Choice of Law. The laws of the state of govern this assignment (without giving effect to its conflicts of law principles).
• (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in County, .

10. AMENDMENTS.

No amendment to this assignment will be effective unless it is in writing and signed by a party or its authorized representative.

11. COUNTERPARTS; ELECTRONIC SIGNATURES.

• (a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
• (b) Electronic Signatures . This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

12. SEVERABILITY.

If any one or more of the provisions contained in this assignment is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this assignment, but this assignment will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this assignment to be unreasonable.

13. NOTICES.

• (a) Writing; Permitted Delivery Methods . Each party giving or making any notice, request, demand, or other communication required or permitted by this assignment shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this assignment: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
• (b) Addresses. A party shall address notices under this section to a party at the following addresses:
• If to the Original Tenant:
• If to the New Tenant:
• (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

14. WAIVER.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this assignment will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

15. ENTIRE AGREEMENT.

This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.

16. HEADINGS.

The descriptive headings of the sections and subsections of this assignment are for convenience only, and do not affect this agreement's construction or interpretation.

17. EFFECTIVENESS.

This assignment will become effective when all parties have signed it. The date this assignment is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this assignment.

18. NECESSARY ACTS; FURTHER ASSURANCES.

Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this assignment contemplates or to evidence or carry out the intent and purposes of this assignment.

[SIGNATURE PAGE FOLLOWS]

Each party is signing this agreement on the date stated opposite that party's signature.

ORIGINAL TENANT

[PAGE BREAK HERE]

LANDLORD'S CONSENT AND RELEASE

As Landlord under the Lease, I hereby consent to this assignment of the Lease, and to the New Tenant's assumption of the Original Tenant's obligations under the Lease, including the obligation to pay rent when it is due. As of the Effective Date, I release the Original Tenant from all liability for obligations (including rent payments) under the Lease. However, the Original Tenant remains primarily obligated as tenant under the Lease and I do not waive or relinquish any rights under the Lease against either the Original Tenant or the New Tenant.

Attach a copy of the Lease as Exhibit A

Free Assignment of Residential Lease Template

What's an assignment of residential lease.

With an assignment of residential lease, you can transfer your interest in a lease to another party before your lease term is up, with your landlord's written permission. The new tenant takes on the lease responsibilities, including rent and property maintenance, and you are released from most (if not all) of your duties. We offer an assignment of residential lease document to ensure proper documentation of the landlord's written approval of your lease transfer to a new tenant with ease.

Here's the information you'll need to have handy to complete your assignment of residential lease:

• Who it's going to : Have the information about the rental property ready and the name and contact information for both the original renter and the new renter handy
• Which state will govern it : Specify a state so it's clear what laws apply to the document
• Subject matter : Prepare a summary of the general terms, like the planned rent amount
• Dates : Be clear about the beginning and end dates of the lease

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Best Practices: Obtaining Assignment of Leases and Landlord Waivers under SOP 50 10 5(J)

• May 16, 2018
• Michelle Sergent Kaas

SOP 50 10 5(J), Subpart B, Chapter 4 provides the following:

• When a substantial portion of the loan proceeds are to be used for leasehold improvements or a substantial portion of the collateral consists of leasehold improvements, fixtures, machinery, or equipment that is attached to leased real estate, the Lender should obtain:
• A term including renewal options that equals or exceeds the term of the loan; and
• A requirement that the lessor provide a 60-day written notice of default to the Lender with option to cure the default; and
• A Landlord’s Waiver. The Landlord’s Waiver gives the Lender access to the leased premises and facilitates the liquidation of the collateral on the borrower’s premises and should be obtained for all SBA loans with tangible personal property as collateral.

Obtaining an assignment of lease and a sufficient landlord waiver that meets SBA requirements can be a difficult task.  The borrower loses bargaining power once a lease is signed, as the landlord has little incentive to negotiate.  If possible, the borrower and/or the lender should negotiate the landlord waiver when the borrower is negotiating the lease.  This will allow the parties an even playing field upon which to negotiate.  Should the parties not come to an agreement, then the borrower can look elsewhere for an acceptable lease.

The lender and the landlord have two competing interests when it comes to assignment of leases and landlord waivers.  The lender needs to protect its collateral, to obtain access to the premises and to have time to remove its collateral upon default and/or termination of the lease.  The landlord, on the other hand, needs to remove the collateral as soon as possible in order to obtain a new tenant who will start paying rent.  Striking a balance between these competing interests is often challenging and time consuming.

If a landlord will not allow a blanket assignment of lease, then try to obtain a provision allowing an assignment upon certain criteria and/or approval of the landlord.  The landlord will more likely allow this if he has the power to approve the assignment.  If the landlord does not provide the lender with an opportunity to cure a borrower default under the lease, then propose language allowing the lender to cure the default within the same cure periods as set forth in the lease.  If the lender is subject to the same time periods as the borrower/ tenant, the landlord may be more likely to allow the lender the opportunity to cure the default.  If the landlord will not allow the lender 60 days to remove the collateral, then the lender can propose the payment of rent during this time period.  If the landlord is getting paid rent during this period, he may be more likely to give the lender the time it needs to remove the collateral.

The SBA has acknowledged the difficulties of obtaining assignment of leases and landlord waivers in the new SOP.  SOP 50 10 5(J), Subpart B, Chapter 4 now provides that “[i]f the Lender is unable to obtain the assignment of lease or landlord’s waiver Lender must document its file with the attempt to obtain the assignment and the landlord’s reason(s) for not providing it.”  Should you encounter a difficult landlord, make your best attempts to obtain the assignment of lease and sufficient landlord waiver.  If you are not able to obtain everything requested from the landlord, then follow prudent lending practices and document your file accordingly.

For more information on assignment of leases and landlord waivers, contact Michelle Sergent Kaas at [email protected] or at 267.470.1167.

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