Sublease and Assignment

Lease provisions restricting Assignment or sublease

- Unless a lease expressly limits or prohibits assignment or sublease, T is free to transfer the leasehold by either method

Sublease 1

At common law a transfer by T is a sublease if the T retains a reversion in the property after the transfer. IF the tenant does not retain a reversion, the transfer is an assignment

Sublease 3

If T subleases, the sublessee is not personally liable to the landlord for rent Justification - there is neither privity of contract nor privity of estate between the landlord and the sublessee.

Sublease

If T transfers less than the entire remaining terms of his leasehold, he has made a sublease and he becomes the landlord of the sublessee. - No privity of estate with LL and cannot be sued by the LL.

L leases blackacre to T, who assigns the leasehold to N, who fails to pay rent

L-N = privity of estate L-T = privity of contract

Sublease 2

Many modern cases hold that the reservation of the right to reenter for nonpayment of rent is deemed a contingent reversionary interest, so that the transfer is a sublease even though, there is no actual reversion retained by T. - Because it is a sublese, there is no privity of estate between L and T2. Thus, if T2 fails to pay rent, L cannot sue him directly.

Novation

new contract between L and T2, and the previous contract between L and T extinguished. Scenario: - L consents to the assignment to T2 and releases T.

Release by landlord

only way T can escape his duty to pay rent is to get an implied or expressed ----- from L.

Touch and concern

promise must touch and concern the assigned estate; either the leasehold (when T assigns) or the reversion (when L assigns)

Lease provisions restricting Assignment or sublease - RS Second Property - Reasonableness - Growing minority

A restraint on alienation without the consent of the landlord of a T's interest in leased property is valid, BUT the LL's consent to an alienation by the tenant cannot be withheld unreasonably, unless a freely negotiated provision in the lease gives the LL an absolute right to withhold consent.

Lease provisions restricting Assignment or sublease - RS/Statute

Implied obligation of reasonableness; a number of states have implied an obligation to act reasonably when denying consent to a transfer.

Promises that run with leasehold estate

Intent - the original parties to the lease must intend that the promise bind assignees Privity - the assignee must be in either privity of estate or privity of K with the party enforcing the promise or against whom the promise is sought to be enforced Touch and concern

suppose the lessee transfers all of his interest in some physical part of the premises; is this a sublease or a partial assignment?

Most courts say this is a partial assignment

Lease provisions restricting Assignment or sublease - Common Law - Majority

Permits L to deny consent to a transfer for any reason or for no reason at all

L to T. T promise to pay rent. T assigns his lease to T2.

T2 is liable for rent provided in the L to T lease. L can also sue T for rent because T remains liable on his promise to pay rent - However, T2 is primarily liable because he has the benefit of possession. the original T's liability is based on a privity of contract thus is secondary.

Privity of Contract

is simply the term used to describe why the original landlord and tenant are liable to each other

Privity of estate

lease between landlord and original tenant amounts to a conveyance of a right of possession from the former to the latter.

Assignment

unless prohibited by the lease, a tenant or LL may freely transfer his interest int he premises. At common law, if the T transfers the ENTIRE REMAINING TERM of his leasehold, he has made an ----and the assignee comes into PRIVITY OF ESTATE with the LL. Privity of estate makes the LL and the assignee liable to each other on the covenants in the original lease that run with the land.