Assignment and Subletting

Freely Assign or Sublet

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

Assignment versus Sublease

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

Condemnation

Condemnation is the taking of land for public use or because it is unfit for use. The right of a tenant upon condemnation depends upon whether the condemnation is partial or complete.

Assignee's Rights and Liabilities--END

If the assignee tenant reassigns the leasehold to a subsequent tenant, then the assignee tenant's privity with the landlord ends. Thus, he is no longer liable because the subsequent tenant is now in privity with the landlord.

Complete Condemnation

If the condemnation is complete, meaning that the entire leased property is taken for the balance of the lease term, then the tenant is discharged from his rent obligation and is entitled to compensation for the taking.

Partial Condemnation

If the condemnation is partial, meaning that only a portion of the leased property is condemned or the property is temporarily condemned, then the tenant must continue to make his rent payments. The tenant is entitled to compensation for the portion of the property that was condemned or the time he was dispossessed from the leased property.

Original Tenant Rights and Liabilities

The original tenant are in privity of contract. and in privity of estate with the landlord. When they assign their lease to someone else, they are only transferring their privity of estate, thus the landlord may still collect rent from them. When the tenants subleases the property, they do not transfer either privity, and are thus liable for rent to the landlord.

Original Tenant's Rights and Liabilities--END

The privity of estate held by the original tenant terminates upon a successful assignment by the tenant to the assignee (but does not terminate upon a sublease). Because the original tenant remains in privity of contract with the landlord, the original tenant remains liable for all the covenants in the lease—even after a successful assignment. Absent an agreement by the landlord to release the original tenant from liability (i.e., a novation), the original tenant remains liable to the landlord for the entire duration of the lease.

Doctrine of Attornment

Under the doctrine of attornment, the tenant is bound to honor any covenant in his lease that has been assigned by the landlord to a third party, if the covenant touches and concerns the land.

Landlord Assignments

Unless the lease provides otherwise, a landlord may assign his rights under the lease, usually as part of a transfer of the landlord's ownership interest in the property, to a third party without the tenant's consent. The tenant owes rent, as well as any other burden imposed by a covenant in the lease that runs with the land, to the assignee landlord. Likewise, the assignee landlord is obligated to the tenant to perform any burden imposed by a covenant that runs with the land. The assignor landlord remains liable to the tenant for all covenants in the lease.

Limitations on Assignment and Subletting--Landlord's permission

When a lease prevents assignment or subletting without the permission of the landlord, and the lease is silent as to a standard for exercising that permission, the modern trend imposes a requirement that the landlord may withhold permission only on a commercially reasonable ground. The traditional rule is that the landlord may withhold permission at his discretion. Non-assignment and non-sublease clauses are valid but narrowly construed. A clause that prohibits assignment does not automatically also prohibit subleasing.

Limitations on Assignment and Subletting--Waiver by the landlord

An assignment or sublease may be waived if the landlord knows of either the assignment or sublease and does not object. When a landlord consents to an assignment or waives her right to object, she cannot then object to a subsequent assignment. This prohibition on an objection to a subsequent assignment does not apply to subsequent subleases, and a minority of jurisdictions do not impose such a prohibition even on a subsequent assignment.

Assignee's Rights and Liabilities

Assignee tenants are in privity of estate with the landlord, and thus the landlord may collect rent from them. In other words, they are liable to the landlord for the rent and any other covenants in the lease that run with the lease.

Attornment

Attornment is the tenant's acknowledgment of a new landlord. Although a tenant can do so formally in a writing, a tenant's payment of rent to the new landlord is deemed an attornment. At common law, the tenant's obligations under the lease did not come into existence until attornment. Today, a tenant's obligations to an assignee landlord arise automatically upon notice of the assignment, and attornment occurs primarily in the context of the transfer of ownership of leased commercial property. For example, a tenant in a commercial lease may be obligated under an attornment clause to acknowledge the tenant's lease obligations to a person who gains ownership of the property through a foreclosure sale.

Sublessee's Rights and Liabilities

Because the sublessee is not in privity of estate or contract with the landlord, the sublessee is not liable to the landlord for the rent or any other covenants in the lease, but he is liable to the lessee. However, if the sublessee expressly assumes the rent covenant (or any other covenants), then he becomes personally liable to the landlord. Although the sublessee can enforce all covenants made by the original lessee in the sublease, the sublessee cannot enforce any covenants made by the landlord.

Limitations on Assignment and Subletting--Prohibition

When a lease prohibits the tenant from assignment or subletting the leasehold, the tenant may nevertheless assign or sublet the premises. However, the landlord generally can then terminate the lease for breach of one of its covenants and recover any damages.