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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.

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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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Lease Assignment Agreement

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ContractsCounsel has assisted 221 clients with lease assignment agreements and maintains a network of 170 real estate lawyers available daily. These lawyers collectively have 23 reviews to help you choose the best lawyer for your needs. Customers rate lawyers for lease assignment agreement matters 4.99.

A lease assignment agreement is a legally binding contract outlining the terms and conditions of transferring a lease from one party to another in one place. This means the assignee becomes the new tenant and assumes all the rights, obligations, and liabilities under the original lease. Lease assignments are commonly used in real estate transactions when a tenant wants to transfer their lease to another party before the lease term expires. We will discuss the lease assignment agreements' purpose, key elements, and other relevant aspects.

Key Elements of a Lease Assignment Agreement

A lease assignment agreement includes several key elements outlining the terms and conditions of the lease transfer. These elements may vary depending on local laws and specific circumstances but generally include the following:

• Parties: The lease assignment agreement should clearly identify the parties involved, including the original tenant (assignor), the new tenant (assignee), and the landlord.
• Property: The agreement should specify the property subject to the lease assignment, including the address, unit number, and relevant details.
• Terms: The agreement should state the lease assignment's effective date, the original lease's remaining term, and any renewal or termination provisions.
• Rights and Obligations: The agreement should outline the rights and obligations of the assignor, assignee, and landlord, including rent payments, maintenance responsibilities, and any other lease terms that will carry over to the assignee.
• Consent: In most cases, the lease assignment agreement requires the landlord's written consent. The agreement should specify the conditions and process for obtaining landlord consent.
• Indemnification: The agreement may include provisions for indemnifying the landlord against any losses or damages resulting from the lease assignment.
• Governing Law : The agreement should specify the governing law and jurisdiction applicable to any disputes or legal matters related to the lease assignment.

Legal Implications of Lease Assignment Agreements

Lease assignments have legal implications for all parties involved. It is important to understand the potential legal risks and obligations associated with lease assignments. For tenants, it may be necessary to review the original lease agreement and seek legal advice to ensure compliance with the terms and conditions of the lease assignment. Landlords should carefully review and approve lease assignments to protect their rights and interests. In some jurisdictions, landlords may have the right to reject a proposed lease assignment for valid reasons.

Benjamin W.

Practical tips for managing lease assignment agreements.

Lease assignments can be complex, and it is important for tenants and landlords to approach them with caution. Here are some tips for navigating lease assignments:

For Tenants

• Review the Original Lease Agreement: Understand the terms and conditions of the original lease before entering into a lease assignment agreement.
• Seek Legal Advice: Consider consulting with a real estate attorney to ensure compliance with local laws and protect your rights and interests.
• Obtain Written Consent from the Landlord: Follow the process outlined in the lease assignment agreement to obtain written consent from the landlord before proceeding with the assignment.
• Communicate with all Parties Involved: Keep open communication with the assignee, assignor, and landlord throughout the process to avoid misunderstandings or disputes.
• Fulfill Obligations under the Original Lease: Even after the lease assignment, the assignor may still be responsible for fulfilling their obligations under the original lease until the effective date of the assignment.

For Landlords

• Review the Lease Assignment Carefully: Carefully review the proposed lease assignment agreement, including the terms and conditions, rights and obligations of the assignor and assignee, and any indemnification provisions.
• Require Written Consent: Insist on obtaining written consent from the assignor and assignee before allowing the lease assignment to proceed, as this protects your rights and interests as a landlord.
• Verify Financials and Credentials of Assignee: Conduct thorough due diligence on the proposed assignee's financials and credentials to ensure they can fulfill the lease obligations.
• Update Lease Documentation: Once the lease assignment is approved, update the lease documentation to reflect the new tenant (assignee) and provide copies to all parties involved.
• Communicate with all Parties Involved: Maintain open communication with the assignor, assignee, and any property management or legal professionals involved in the lease assignment process to ensure a smooth transition.

Potential Risks and Considerations

There are potential risks and considerations that tenants and landlords should be aware of when it comes to lease assignments. These may include:

• Non-Compliance with the Original Lease: If the assignee fails to comply with the terms and conditions of the original lease, the assignor may still be held liable for any breaches.
• Landlord's Right to Reject: In some jurisdictions, landlords may have the right to reject a proposed lease assignment for valid reasons, such as the assignee's inability to meet financial obligations or lack of appropriate credentials.
• Indemnification Provisions: The lease assignment agreement may include indemnification provisions that hold the assignor and assignee responsible for any losses or damages resulting from the lease assignment.
• Legal Disputes: Disputes may arise during the lease assignment process, such as disagreements over the terms and conditions, consent requirements, or other related matters.
• Local Laws and Regulations: Lease assignments are subject to local laws and regulations, which may vary by jurisdiction. It is important to ensure compliance with applicable laws and seek legal advice.

Key Terms for Legal Assignment Agreements

• Consideration: Refers to the value or benefit each party receives in exchange for entering into the assignment agreement.
• Assignment: The transfer of rights or obligations from one party (assignor) to another (assignee) as agreed upon in the assignment agreement.
• Consent: The requirement for obtaining permission or agreement from relevant parties, such as the original contracting parties, for the assignment to occur.
• Indemnity : The legal protection provided by the assignor to the assignee against any potential losses, liabilities, or claims arising from the assignment.
• Governing Law: The jurisdiction or legal system that governs the interpretation, validity, and enforcement of the assignment agreement, which is typically specified in the agreement itself.

Final Thoughts on Legal Assignment Agreements

A lease assignment agreement is a legally binding contract allowing tenants to transfer their lease rights and responsibilities to another party. It is important for both tenants and landlords to carefully review and understand the terms and conditions of a lease assignment, seek legal advice if needed, and maintain open communication throughout the process. By following the appropriate steps and considering potential risks and considerations, lease assignments can be a useful tool for tenants and landlords to manage their lease agreements effectively.

However, you need the help of a professional lawyer to ensure you do not end up messing up a lease assignment agreement. So, ensure you approach an experienced attorney who is well-versed in the field.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

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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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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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Lease Assignment Agreement

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Free Lease Assignment Agreement Template

Last Updated August 13, 2024

A Lease Assignment Agreement or Assignment of Lease is a legally binding contract between a lessee (assignor) and a new tenant (assignee). It can be used for commercial or residential properties. Tenants use this document to pass their contract obligations to a third party if they need to exit a lease early. Such a situation may occur if a tenant must relocate or shut down a business before the lease ends.

The landlord (lessor) is typically not a party to this new contract. However, the assignee must meet the terms of the original lease. In specific cases, the landlord must sign a consent to allow a tenant to assign the lease, and some may want to vet the assignee before consenting.

The Lease Assignment Agreement outlines the terms of the agreement, assigns responsibilities for breaches, and documents each party’s acceptance.

Let’s discuss how this document works and how you can create yours.

Who Needs A Lease Assignment?

Lease assignments are used by commercial or residential tenants to “sell” a lease to another person. If they cannot assign the lease, the tenant must pay rent for a space they aren’t using until the agreed-upon period is complete. However, they may pass the lease if they find a willing tenant.

The new tenant is known legally as the assignee, and the original tenant is the assignor. Assigning a lease frees you to a great extent because the landlord knows someone else has taken your place.

Lease Assignment is different from subletting a premise. In a sublease, the tenant creates a different contract, which may include a different rent amount. However, the relationship between the tenant and landlord remains the same as in the signed lease. The tenant is responsible for collecting and remitting payment to the landlord and ensuring no breaches occur.

The Role of the Landlord in a Lease Assignment

The landlord rightly expects that a tenant stays responsible for their lease until it expires. However, because of constant changes, they may anticipate a tenant wanting to exit a lease early. Therefore, many lease agreements include provisions for possible assignments.

Even when a lease agreement does not have such a provision, the tenant can negotiate a deal with the landlord. Depending on your jurisdiction, the original lease sometimes contains language requiring that the landlord not unreasonably object to a lease assignment.

Still, some landlords may want to vet the new tenant like they did the first. If your landlord decides to screen the new tenant as they did with you, they may review the following information:

• Financial status: This is especially important to the landlord if you pass on rent responsibility to the new tenant. The landlord will want proof that the assignee will make on-time payments. Checking the new tenant’s finances works in your favor because most leases will hold you accountable for missed and late payments even after you assign the contract to another person.
• Restrictions on modifications and activity: The landlord may need to know beforehand if the new tenant intends to make significant alterations to the property. If they think the proposed changes are too extensive, they may deny you permission to assign the lease. The same applies to changes in use.
• Likelihood of compliance: To determine whether the assignee will comply with the lease, a landlord may require references by former landlords.

Many landlords avoid the extra work, preferring that you remain liable. Therefore, you need to choose a trustworthy tenant and ensure they understand their obligations and responsibilities regarding the lease.

Information to Include in a Lease Assignment Agreement

Ensure your lease assignment agreement contains all necessary information so that it releases you of as much responsibility as possible.

The Type of Lease

State whether the lease is for a commercial or residential property.

Personal Information

The lease should have the names, addresses, and other information about the assignor, assignee, and landlord.

Include the physical address of the property to identify it. You may also include the size and other descriptions.

Length of the Assignment

The length of the assignment is the time left on the lease. Afterward, the new tenant may enter into a new contract with the landlord to continue using the premises. Include the effective and end dates of the assignment.

Liabilities

Outline your liabilities. Although you are exiting, your name stays on the original lease. Discuss with the assignee and the landlord to determine which liabilities you are keeping and how breaches will be resolved.

Date When You Signed the Original Lease

It’s essential to include the date the original lease took effect. Remember that the terms and conditions of that lease apply to the assignment.

Landlord’s Consent

Sometimes, the landlord’s permission to assign a lease is included as a section in the assignment agreement. However, many use a separate document to obtain the landlord’s consent and then attach it to the assignment agreement.

Unless both parties sign the contract in agreement, it remains void.

You generally do not need to include the details of the lease agreement, but the new tenant needs a copy to determine whether they agree to its terms before signing the assignment.

Easy Legal Docs has created an adaptable Lease Assignment Agreement template to get you started. Landlords, tenants, and other businesses find our collection of legal documents versatile and easy to download for free when they need them.

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Lease Assignment Agreement Template

Below you can see a sample of the Lease Assignment Agreement template:

Lease Assignment Agreement FAQs

What is a lease assignment agreement.

A Lease Assignment Agreement is a legally binding contract between a lessee (assignor) and a new tenant (assignee). It can be used for commercial or residential properties. Tenants use this document to pass their contract obligations to a third party if they need to exit a lease early. Such a situation may occur if a tenant must relocate or shut down a business before the lease ends.

Is the tenant liable for breaches after assigning a lease?

It depends on the terms of the assignment. If the landlord releases you of responsibility, then the assignee is liable. However, if the original lease holds you liable, the landlord may pursue you and the assignee for compensation.

What is the difference between a sublease and a lease assignment?

Assigning a lease transfers ownership of an existing lease. The assignee takes the tenants' place in the lease. Subletting requires creating a separate contract between a tenant (sublessor) and a subtenant (sublessee). In a sublease, the lease agreement with the landlord remains in place, so the tenant is still responsible.

Are there alternatives to lease assignment?

If you don't have the option to assign because your landlord denies it or the lease prohibits it, check whether the contract has a "Break Clause" and the requirements for getting out early. Alternatively, you may sublet the property to another person.

Can an assignee assign a lease?

How many times a lease is assigned depends on the landlord. Leases that span a decade or more may go through several assignments in their lifetime. The conditions set in the first agreement determine whether an assignee may pass responsibilities to a new person.

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Assignment and Assumption of Lease and Landlord Consent

You can use a Lease Assignment to outline the terms for assigning the responsibilities of a lease to someone else. You need to make sure that the landlord has given his or her consent for the Lease Assignment to go into effect. The terms of assignment, consent of the lessor, and acceptance by the assignee are covered in this Lease Assignment, including the length of the assignment, consent of the person taking over the lease, and acceptance by you, the current lease holder. A Lease Assignment transfers the rights and obligations of an existing lease from one tenant to another.

Any [ GREEN ] highlighted language is intended to be filled in by the user. Any [ YELLOW ] highlighted language is considered optional or conditional by the attorney community. Consult with an attorney before using this document. This document is not a substitute for legal advice or services. Refer to our Terms of Use for more details.

This form has been prepared for general informational purposes only. It does not constitute legal advice, advertising, a solicitation, or tax advice. Transmission of this form and the information contained herein is not intended to create, and receipt thereof does not constitute formation of, an attorney-client relationship. You should not rely upon this document or information for any purpose without seeking legal advice from an appropriately licensed attorney, including without limitation to review and provide advice on the terms of this form, the appropriate approvals required in connection with the transactions contemplated by this form, and any securities law and other legal issues contemplated by this form or the transactions contemplated by this form.

ASSIGNMENT AND ASSUMPTION OF LEASE AND LANDLORD CONSENT

THIS ASSIGNMENT AND ASSUMPTION OF LEASE AND LANDLORD CONSENT (" Agreement ") is effective as of _________________ (the “ Effective Date ”), between  _____________  a ________________ corporation (" Assignor "), and ________________   a ________________ corporation (" Assignee ") who agree as follows:

A.              Lease .  ________________ a Delaware corporation (“ Landlord ”), and Assignor, as tenant, are parties to that certain Master Lease dated as of ________________  (the “ Master   Lease ”), pursuant to which Assignor leased from Landlord, and Landlord leased to Assignor, certain premises consisting of approximately ________________ rentable square feet located ________________ (the “ Leased Premises ”) in the building with a street address of ________________________________  (the “ Building ”).  A true, correct and complete copy of the Lease is attached hereto as  Exhibit “A”  and is by this reference incorporated herein and made a part hereof.  The Lease is scheduled to expire on ________________. 

B.         Assignor desires to transfer and assign all of its right, title and interest, as subtenant, in, to, and under the Lease to Assignee, and Assignee wishes to assume all of Assignor's duties, liabilities, and obligations thereunder.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties mutually covenant and agree as follows:

1.               Assignment .  Assignor, for and in consideration of the payment of rent and the performance of all of the Lease covenants by Assignee as successor subtenant under the Lease, does hereby grant, assign, and convey to Assignee all of Assignor’s right, title, and interest in and to the Lease, for the residue of the term of the Lease, at the rent and other charges set forth in the Lease and subject to the conditions contained in the Lease and henceforth to be performed and observed by Assignee.    

2.               Performance of Lease Covenants and Conditions; Assumption . For the benefit of Assignor and Landlord and Landlord, Assignee hereby assumes all rights, duties, and obligations of the subtenant under the Lease and Assignee hereby covenants and agrees to perform all of the duties and obligations of the subtenant pursuant to the Lease from and after the Effective Date as if Assignee were the original subtenant thereunder. Assignee shall make all payments of rent, additional rent, and other sums due under the Lease from the subtenant thereunder, for the period from and after the Effective Date, when due and payable strictly in accordance with the terms, covenants, and conditions of the Lease.

3.               Letter of Credit .  Within three (3) business days following the full execution of this Agreement by the parties hereto, Landlord’s execution of its consent and Landlord’s execution of the Landlord’s Consent, each as set forth below, Assignee shall deliver to Landlord a letter of credit which satisfies the requirements of Section 21 of the Lease.  Within three (3) business days following Landlord’s receipt of such Letter of Credit from Assignee, Landlord shall return the original Letter of Credit to Assignor and thereafter such original Letter of Credit shall be void and of no further force or effect. 

4.               Possession . Assignor hereby tenders, and Assignee hereby accepts, possession of the Premises in its “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS” condition. Assignor makes no representations or warranties with respect to the physical condition of the Premises or the suitability thereof for Assignee’s use.

5.               Assignment and Subleasing . Subject to the provisions of the Lease, Assignee may assign the Lease, or sub-lease all or any portion of the Premises, but Assignee must also obtain Assignor’s prior written consent, which consent shall not be unreasonably withheld or delayed. As a condition of granting such consent to an assignment, Assignor may require that the new assignee assume the obligations of the subtenant under the Lease and take subject to all of the terms and conditions contained both in the Lease and this Agreement and as a condition of consenting to any lease, Assignor may require that each sublessee agree, by an express provision in its lease, to be bound by all of the terms and provisions of the Lease and this Agreement.  If Assignee assigns the Lease or leases the Premises, in whole or in part, Assignee shall nevertheless remain liable to Assignor for the full performance of Assignee’s obligations under the Lease and this Agreement.

6.               Entry . Assignee agrees that Assignor may at any time during the regular business hours enter upon the Premises for purpose of inspecting the same.

7.               Insurance . Assignee agrees to maintain in effect all of the insurance coverages required to be maintained by the subtenant under the Lease and to provide evidence of such insurance to Assignor from time to time. Assignee agrees to name Assignor as an additional insured under the general liability insurance carried by Assignee with respect to the Premises.

8.               Lease Amendments or Modifications . Assignee shall not enter into any lease amendments or modifications of the Lease with Landlord without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed.

9.               Broker Commissions; Fees .  Assignee acknowledges and agrees that Assignee shall be solely responsible for the payment of all broker commissions in connection with this Agreement.  Each of Assignee and Assignor represents and warrants to the other that it has taken no act nor permitted any act to be taken pursuant to which it or the other party hereto might incur any claim for brokerage commissions or finder’s fees in connection with the execution of this Agreement other than Jones Lang LaSalle representing Assignee and CBRE representing Assignor.  Each party agrees to indemnify, defend and hold the other harmless against all liabilities and costs arising from a breach of such representation and warranty, including, without limitation, for attorneys’ fees and costs in connection therewith.  In addition, Assignee shall pay any fees charged by Landlord and Landlord in connection with obtaining the consent of each of them.

10.            Indemnification.    Assignee hereby indemnifies and holds Assignor and its officers, directors, shareholders, members, affiliates, representatives, agents, employees, successors and assigns harmless from and against all claims, damages, demands, losses, expenses and costs incurred, arising out of, or in connection with Assignee’s failure, from and after the Effective Date, to observe, perform and discharge any and all of the subtenant’s covenants, obligations and liabilities in connection with the Lease.  Assignor hereby indemnifies and holds Assignee and its officers, directors, shareholders, members, affiliates, representatives, agents, employees, successors and assigns harmless from and against all claims, damages, demands, losses, expenses and costs incurred, arising out of, or in connection with Assignor’s failure to the extent accruing prior to the Effective Date, to observe, perform and discharge any and all of the subtenant’s covenants, obligations and liabilities in connection with the Lease.

11.            Defaults under Lease . Within two (2) days after receiving any notice from Landlord relating to the performance of the obligations of the subtenant under the Lease, Assignee shall send a copy of such notice to Assignor. Within two (2) days after receiving any notice from Landlord relating to the performance of any obligations of the subtenant under the Lease, Assignor shall send a copy of such notice to Assignee. If Assignee is in default under the provisions of the Lease or this Agreement, and if Assignee fails to cure such default within fifteen (15) days after receipt of notice from Landlord or Assignor specifying the nature of such default with respect to non-monetary defaults and two (2) business days with respect to monetary defaults, then Assignor may reenter the Premises, with or without process of law, and cure such default, in which event Assignee shall promptly reimburse Assignor for all costs and expenses with regard thereto, or, at Assignor’s option, Assignor may repossess and enjoy the Premises as of Assignor’s first and former estate and either declare this Agreement to be terminated at no further force or effect or, without terminating the same, Assignor may reassign the Lease to itself or others or sublet the Premises to itself or others, in whole or in part, for the account of Assignee, in which event Assignee shall promptly reimburse Assignor for any rent deficiencies and other charges, costs, reasonable attorneys’ fees, or expenses so incurred by Assignor with respect thereto.

12.            Attorneys’ Fees .  In any action between the parties to enforce any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled to recover from the non-prevailing party, in addition to damages, injunctive relief or other relief, its reasonable costs and expenses, including, without limitation, costs and reasonable attorneys’ fees, as the court shall determine.  Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment.

13.            Successors and Assigns .  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

14.            Severability .  If any provision of this Agreement shall be held invalid or unenforceable for any reason and to any extent, the remainder of this Agreement shall not be affected, but shall be enforced to the greatest extent permitted by law.

15.            Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of California.

16.            Counterparts .  This Agreement may be executed in one or more counterparts.  All such counterparts, when taken together, shall comprise the fully executed Agreement.  Signatures of the parties transmitted by facsimile or electronic mail in PDF format shall be deemed to constitute originals and may be relied upon, for all purposes, as binding the transmitting party hereto.  The parties intend to be bound by the signatures transmitted by facsimile or electronic mail in PDF format, are aware that the other party will rely on such signature, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of the signature.

17.            Notices .  For purposes of this Agreement, the notice addresses for Assignee and Assignor shall be as follows:

_____________________

Attn: ________________

18.            Warranty and Authority .  Each party represents that this Agreement has been executed by its duly authorized representative.

19.            Condition Precedent .  This Agreement is not and shall not be effective unless and until each of Landlord and Landlord provides its consent to this Agreement.  If either Landlord or Landlord fails to consent to this Agreement with thirty (30) days after delivery of this Agreement to Landlord and Landlord then either Assignor or Assignee may terminate this Agreement by written notice thereof to the other party at any time prior to receipt of Landlord’s and Landlord’s consent and in such event neither Assignor nor Assignee shall have any obligations to the other party under this Agreement.  Assignee shall reasonably cooperate with Assignor to obtain Landlord’s and Landlord’s consent, including providing Landlord and Landlord with financial information and other information requested by Landlord and Landlord

IN WITNESS WHEREOF, this Agreement has been executed as of the Effective Date set forth above.

LANDLORD’S CONSENT

By its execution below, Landlord consents to this assignment of the Lease to Assignee and acknowledges the continuance of the Lease by and between Assignee and Landlord.  Landlord is not a party to the assignment and executes this document for the limited purpose of granting its consent.  The consent to this assignment shall not act as or be deemed as a waiver of Landlord’s right to consent to any subsequent assignment or lease in accordance with the terms of the Lease.  Notwithstanding the foregoing, so long as Assignee delivers to Landlord a letter of credit which satisfies the requirements of Section 21 of the Lease then within three (3) business days following Landlord’s receipt of such Letter of Credit from Assignee, Landlord shall return the original Letter of Credit to Assignor and thereafter such original Letter of Credit shall be void and of no further force or effect.

Landlord, Inc.

By:                                                      

Its:                                                       

LANDLORD CONSENT TO ASSIGNMENT OF LEASE

By its execution below,  Landlord consents to this assignment of the Lease to Assignee and acknowledges the continuance of the Lease by and between Assignee and Landlord.  Landlord is not a party to the assignment and executes this document for the limited purpose of granting its consent.  Landlord’s consent shall not relieve or discharge Landlord from any of its obligations under the Master Lease, whether or not such Default should occur by fault of the Assignee.  The consent to this assignment shall not act as or be deemed as a waiver of Landlord’s right to consent to any subsequent assignment or lease in accordance with the terms of the Master Lease.

Landlord’s consent is conditioned upon payment by Landlord of all Rent and any other charges due under the Master Lease at the time of the assignment (notwithstanding that such charges may be billed following the date of the assignment).

a ________________ corporation

By:                                               

Its:                                               

(see attached)

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Assignments & Subleases in Commercial Real Estate Leases

Assignments and Subleases

For many businesses, entering into a lease is an essential and important part of their businesses.  Other than payroll, lease payments are often a business’s largest expense.  However, given the complexity and sheer length of a typical commercial lease, it is a daunting proposition to review and negotiate a lease on your own.  This is the third in a series of articles discussing the major issues to be considered in a typical commercial lease.

This week, we’ll explore assignments and subleases.  While assignments and subleases will have varying terms and conditions on a case-by-case basis, we’ll discuss generally about the issues involved in most assignments and subleases.

An assignment of a lease occurs when an existing tenant (“Assignor”) assigns its rights and obligations under the lease to a new tenant (“Assignee”).  Another form of assignment occurs when a landlord sells the property and a new landlord takes over the lease.  A sublease is often used when the existing tenant (often referred to as “Sublandlord” or “Sublessor”) rents a portion of, or the entire leased premises to another tenant (“Sublessee”), typically for a limited term.  Some leases provide landlords the right to terminate the lease if an existing tenant requests an assignment or lease.

Assignment clauses may also be triggered unwittingly by change of ownership, or equity transfers, in a corporate or LLC tenant.  Leases frequently state that a transfer of a certain percentage of the shares or membership interest in a corporate or LLC tenant shall be construed an assignment.  A tenant should always check its lease for such provisions prior to entering into an equity transfer transaction.

PRACTICAL COUNSEL:  In both assignments and subleases, the rights and obligations of the existing and incoming tenants are delineated in the underlying lease document.  A prospective tenant should take care when reviewing a proposed lease to ensure that they understand the implications of an assignment or sublease, as they may be faced with unfavorable consequences.  Whether a business needs to move out of a leased space due to growth, sell itself, or has space that is not being used, the assignment and sublease clauses will come into play and it is imperative to understand their implications.  The actual assignment of lease or sublease agreements should also be drafted and negotiated carefully to conform to the underlying lease, as well as protect the best interests of the Assignor, Assignee, Sublessor or Sublessee.

The Importance of Lease Assignment Agreements

Understanding Lease Assignment Agreements: A Vital Guide for Franchisees

Running a franchise is no small feat, especially when you’re managing multiple locations. Amidst the hustle of daily operations, financial reporting, marketing strategies, and employee management, the importance of lease agreements can often be overlooked. However, understanding and managing lease assignment agreements is crucial for the long-term success and stability of your franchise business.

Lease assignment agreements are crucial in real estate transactions as they facilitate the transfer of lease rights and obligations from one party to another. For tenants, they offer flexibility by allowing them to exit leases before expiration without penalties, while for landlords, they ensure continuity of rental income and compliance with lease terms.

This article will dive deeper into lease assignment agreements, how they can impact your business, and why you should keep an eye on them.

What is a Lease Assignment Agreement?

A lease assignment agreement is more than just a piece of paper; it is a vital legal document that can significantly impact your business operations and financial health. This agreement comes into play when you need to transfer the lease of one of your locations to another party, perhaps when selling a location or restructuring your business. It ensures that the new tenant assumes all rights and responsibilities associated with the lease, protecting both the franchisee and the landlord from potential legal disputes and financial losses.

For franchisees, particularly those with multiple locations, keeping a close eye on lease assignment agreements is essential. These agreements ensure smooth transitions, whether you are expanding, downsizing, or selling parts of your business. They help maintain operational continuity and safeguard your investments, allowing you to focus on growth and profitability without the looming threat of legal complications or unexpected financial burdens.

A lease assignment agreement is a legal document that transfers the rights and responsibilities of an existing lease from one party (the assignor) to another party (the assignee). This is common in business scenarios where a franchisee, who operates multiple locations, wants to transfer the lease of one of their locations to another party.

Why is a Lease Assignment Agreement Important to Franchisees?

For a franchisee with multiple locations, a lease assignment agreement is crucial for several reasons:

Transferring Responsibilities : When a franchisee decides to sell or transfer ownership of one of their locations, they often need to transfer the lease agreement along with it. The lease assignment agreement outlines the terms of this transfer, including the new tenant’s responsibilities for rent, maintenance, and compliance with lease terms.

Avoiding Breach of Contract : Without a proper lease assignment agreement, attempting to transfer a lease to a new tenant could be a breach of contract with the landlord. This could lead to legal issues, including eviction or financial penalties. The agreement ensures that the transfer is done in accordance with the terms of the original lease.

Protecting Investment : For a franchisee, each location represents a significant investment of time and money. Properly managing lease agreements ensures that this investment is protected, even if the franchisee decides to sell or exit a particular location.

Maintaining Brand Reputation : Franchise businesses rely on maintaining a consistent brand image across all locations. Ensuring that lease agreements are transferred smoothly helps maintain this consistency and avoids disruptions in operations that could harm the franchise’s reputation.

Facilitating Growth or Restructuring : Having clear processes for lease assignments makes it easier for franchisees to expand their business by acquiring new locations or reorganizing their existing portfolio. It provides flexibility for future growth or strategic changes.

These agreements mitigate financial risks for both parties and serve as negotiation tools, enabling tenants to find suitable replacements and landlords to vet new occupants. By formalizing the transfer of lease interests, lease assignment agreements provide legal clarity, documentation, and record-keeping, thereby minimizing disputes and ensuring smooth transitions in tenancy arrangements.

Kal Gullapalli, CEO of MPZ Holdings, explains the importance of lease assignment agreements in our latest webinar .

“We spend a lot of time and money on the assignment language. In one scenario, when I first sold a portion of my European Wax Center franchise in early 2020, we were going through a lease assignment. It was 7 stores that I was taking private equity capital on that we were rolling into the new holding company. I offered the landlord everything. So I said, ‘Hey, I’m going to be CEO of the new company. I’m gonna keep my personal guarantee on in the new holding company, you have nothing to worry about’.

6 months later, he held out. There was a time where I even said to the landlord, ‘Here’s $50,000, sign the assignment’. He wouldn’t respond.

I finally got him to sign on March 11th, 2020, just before Covid shut everything down. If this had gone on to mid or late March, my deal with private equity would not have been consummated, which was in the 8 figures. 

It’s really important as you think about these leases that you focus and spend extra money on these assignments and try to make the assignment as liquid as humanly possible”.

The Benefits of Lease Assignments:

Lease assignment agreements play a crucial role in real estate transactions, particularly in the context of commercial leases. Here are some key points highlighting their importance:

Transfer of Lease Obligations :

A lease assignment agreement allows a tenant (assignor) to transfer their rights and obligations under a lease to another party (assignee). This transfer typically includes responsibilities such as paying rent, maintaining the property, and complying with lease terms.

Flexibility for Tenants :

For tenants, lease assignment agreements provide flexibility. They allow tenants to exit a lease before its expiration without incurring penalties or breaking lease terms. This can be beneficial if a business needs to relocate or downsize.

Opportunities for Landlords :

Lease assignment agreements also offer benefits for landlords. They provide landlords with the assurance that the lease obligations will continue to be met even if the original tenant decides to assign the lease to another party. This helps landlords maintain a steady stream of rental income and minimizes vacancies.

Risk Management :

Lease assignment agreements help manage risks associated with leasing property. For tenants, it can mitigate financial risks by transferring lease obligations to a new party. For landlords, it ensures that the property remains occupied and lease terms are honored, reducing the risk of income loss.

Legal Compliance :

By formalizing the transfer of lease rights and obligations through a lease assignment agreement, both parties ensure legal compliance. The agreement outlines the terms of the assignment, including any conditions or restrictions, protecting the interests of both the assignor and the assignee.

Negotiation Tool :

Lease assignment agreements can serve as negotiation tools for both tenants and landlords. Tenants may negotiate favorable terms with prospective assignees to facilitate the transfer, while landlords may negotiate additional guarantees or concessions to mitigate potential risks associated with the new tenant.

Documentation and Record-Keeping :

Having a lease assignment agreement in place provides clear documentation of the transfer of lease rights and obligations. This documentation is essential for record-keeping purposes and can help resolve disputes or misunderstandings that may arise in the future.

What Happens if Lease Assignments Aren’t Handled Correctly?

If lease assignments are not handled properly, it can have significant implications for the franchisee’s business down the road:

Legal Issues : Improperly executed lease assignments can lead to legal disputes with landlords or new tenants, resulting in financial losses or even the loss of the location.

Financial Impact : If a lease assignment is not structured favorably, it could result in increased costs for the franchisee or limit their ability to negotiate favorable terms with the landlord.

Operational Disruptions : Without clear agreements in place, transferring a lease could disrupt operations at the location, affecting revenue and customer relationships.

Impact on Sale Value : When selling a location, having unclear or unfavorable lease terms can reduce the attractiveness of the business to potential buyers, impacting its sale value.

In conclusion , lease assignment agreements are vital components of real estate transactions, offering flexibility, risk management, legal compliance, and negotiation opportunities for both tenants and landlords. They provide a structured framework for the transfer of lease interests while safeguarding the interests of all parties involved.

Leasecake is used by multi-unit operators and franchisees to manage their lease and location data, so they never have to risk losing a location again. To learn more about  Leasecake’s lease management platform  and how we can help you grow your business, manage multiple locations, save money by understanding exactly what’s in your documents, and minimize the risk of overpaying or missing a lease renewal,  schedule a demo .

Using a Lease Audit to Avoid Overpaying Landlords

Mastering advanced lease negotiation with leasecake, you may also like, lease administration: key insights and best practices.

Lease administration is a crucial component of real estate management that encompasses a range of tasks essential to maintaining and optimizing leased properties.

Lease Portfolio Management Software: A Guide to Streamlining Your Lease Portfolio

Lease portfolio management is the strategic oversight and administration of an organization’s collection of lease agreements, essential for optimizing real estate assets and aligning them with business goals

Leasecake Named 2024 “Overall Lease Management Company of the Year”

We’re thrilled to announce that Leasecake has once again been recognized as the “Overall Lease Management Company of the Year” for 2024! […]

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Assignment and Assumption of Lease Agreement (Commercial Lease) (CA)

This assignment and assumption of lease agreement template transfers a tenant's interest under a commercial lease of California real property to a third-party. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. This template assumes that the tenant is assigning all of its rights and obligations under a commercial lease for the remainder of the lease term. If the tenant/assignor desires to transfer less than all of its interest under the lease, a sublease as opposed to an assignment should be used. For a sublease template, see Sublease Agreement. Prior to assigning its lease, assignor should review the lease to determine if landlord consent is required. This template includes an optional consent of landlord and a release of tenant by landlord from further liability under the lease. California imposes documentary transfer tax on instruments that assign or transfer an interest in real property where the consideration is in excess of $100. See Cal. Rev. & Tax. Code § 11911. Certain California cities also impose an additional property transfer tax that varies by city. The Court of Appeals of California explained the circumstances under which a lease would be a taxable transaction in Thrifty Corp. v. Cty. of L.A., 258 Cal. Rptr. 585 (Ct. App. 1989), clarifying that documentary transfer tax is imposed on transfers of property leasehold interest where the term of lease is for 35 years or more (including all extension options and renewals for purposes of determining the term). For more information on assignment and assumption of lease agreements see Lease Assignments.

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

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

The Lease covers the commercial property located at ,    , and more particularly described as follows: (the " Premises "). The Premises contains feet of interior floor space.

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 its rights in, and delegate all of its 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 its rights in, and delegates to the New Tenant all of its 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 against any award, charge, claim, compensatory damages, cost, damages, exemplary damages, diminution in value, expense, fee, fine, interest, judgment, liability, settlement payment, penalty, or other loss (a " Loss ") or any attorney's or other professional's fee and disbursement, court filing fee, court cost, arbitration fee, arbitration cost, witness fee, and each other fee and cost of investigating and defending or asserting a claim for indemnification (a " Litigation Expense ") arising out of the Original Tenant's breach of its obligations under the Lease before the Effective Date.
• (b) The New Tenant shall indemnify the Original Tenant against all Losses or Litigation Expenses relating to the Lease, except if those Losses or Litigation Expenses arise from the Original Tenant's failure to perform its obligations under the Lease before the Effective Date.
• (c)  The New Tenant shall indemnify the Original Tenant against all Losses or Litigation Expenses attributable to the acts or omissions of the New Tenant or its 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 it:

• (a) has the power and authority to enter into and carry out this assignment;
• (b)  has not previously assigned its 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 their 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 , .

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.

[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.

EXHIBIT A Attach copy of Lease

Free Assignment of Commercial Lease Template

How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Assignment of commercial lease: How-to guide

Occasionally, tenants wish to leave a rental property before the end of their lease. Individuals may take new jobs in new cities, and companies may go out of business or sell their enterprises to a third party.

Whatever the reason, tenants can transfer their original commercial lease to new parties by completing an assignment of the lease.

An assignment transfers one party's interest and obligations under a lease to another party.

During these tenant transfers, the new tenant takes on the lease responsibilities, including paying rent and property maintenance of the leased premises, and the original tenant is released from most of their duties.

Successful property management begins with good documentation and a properly drafted, executed assignment:

• Ensures that all parties involved understand the obligations being transferred
• Defines the responsibilities that each party will have under the new arrangement
• Lays the foundation for a long-lasting landlord and new tenant relationship

Important aspects to consider when drafting commercial leases

Laws about the original commercial lease agreement

State laws  governing real estate, renting, leasing, and assignments vary widely and can tremendously affect your arrangement.

Since the tenant is legally responsible for this document, they must include specific information like financial statements in the commercial lease assignment. Consider your state and local laws for additional information required in your area.

Criteria for commercial landlords in providing consents

A landlord may consider only proper factors when deciding whether or not to consent to an assignment.

Some criteria will be regarded as impermissible by courts, such as refusal based on race or sex of the proposed new tenant. If your landlord does not consent to your attempted assignment, ensure they give you clear written reasons for the decision. Failure to provide such reasons can itself be deemed unreasonable.

Consequences of not providing consent

It is essential to seek the landlord’s permission for the proposed transfer of the duties.

Depending on your jurisdiction or the terms of your original lease, a landlord’s failure to respond to your request for consent to assignment within a specific time may be deemed consent. Sometimes, it may give the assigning tenant grounds to terminate the lease. Review the original lease and your state’s laws for additional details.

Although a landlord is not required to consent to a lease assignment agreement, in some cases, your lease will state that a landlord’s consent will not be “unreasonably” withheld. This is more common in commercial leases than in a residential lease. What is considered unreasonable varies from jurisdiction to jurisdiction, and you should review the laws in your area (and the assignment clause in your original lease agreement) for additional information. On the other hand, if the lease states that the landlord may use their “sole discretion” to evaluate the new tenant, they can veto this assignment without any reason.

Rights of the original tenant

The original tenant cannot assign more rights than the original lease. For example, if the lease term is one year, the assignment term cannot be two years.

Review the lease assignments before signing

Most leases require the landlord’s written consent before an assignment becomes effective. Review the assignment provisions and the original lease agreement for additional information and see if other requirements must be met to make the lease assignment agreement valid.

Get the assignment signed

Sign three copies of the assignment, one for you, the other party, and the landlord. Depending on the nature of its terms, you may decide to have the document witnessed or notarized. This will limit later challenges to the validity of a party’s signature.

Be sure the assignee gets a copy of the original lease by attaching it to the assignment. Its terms will bind them, and they should know their new obligations and rights.

If your agreement is complicated, contact an attorney to help draft a document that meets your needs.

Key components of a commercial lease assignment

The following instructions will help you understand the terms of your assignment.

Introduction

In this section, identify the parties and, if applicable, what type of organization(s) they are. Write down how the document identifies each party. For example, the current tenant can be addressed as the “original tenant” or “assignor” as they assign the lease to the new tenant, and the new tenant can be called the “new tenant” or “assignee.”

Furthermore, add the date on which the assignment will become effective – when it is signed.

The “whereas” clauses, referred to as recitals, define the world of the agreement and offer essential background information about the parties.

In this assignment, the recitals include a simple statement of the parties’ intent to assign the original tenant’s interest in the lease and the new tenant’s intent to assume it. Provide a brief description of the rented property and the landlord’s name under the lease.

You don't need to include a complete legal description for the property description, but provide enough information to identify it. For individual houses, the address will usually be sufficient. If the property has a specific name (e.g., “Lincoln Towers”), include that as well. If only a section of the premises is assigned, clarify that in this description.

This section mentions the assignor’s assignment of their right and interest in the lease to the assignee. This assignment clause allows you to determine whether all of the assignor’s interest in the lease is being assigned or only part of it. For example, if interest in only one-half of the premises is being assigned, the document should note this.

Assumption of rights and duties

This section clarifies the assignor’s responsibilities for the duties listed under the lease (e.g., rent, maintenance of property, etc.). For example, whether:

The assignor is ultimately released from any liability they had under the lease. For example, if the assignee defaults, the landlord cannot seek payment from the assignor.

The assignor will be liable to the landlord if the assignee defaults.

In any event, the assignor will remain responsible for any obligations that occurred before the assignment. In other words, if the damage happened to the apartment before the transfer or the assignor did not fulfill another obligation under the lease, the assignor remains responsible for the building occupied.

Reimbursement

In many rental relationships, amounts are paid in advance or deposited as security for the landlord.

At the end of the lease, this security deposit (with deductions subtracted or interest added) is returned to the tenant. If an entire interest is assigned, the lease does not end, and the assigning party cannot get this money back. This paragraph requires the assignee to pay those amounts to the assignor, and any later return of that money by the landlord will be made to the assignee.

Indemnification

In such clauses, the assignee promises to bear the financial cost of any injury the assignor suffers due to its assignment and any lawsuits arising from its activities on the premises. Note that there is an exception for things done by the assignor before the effective date of the assignment — the assignor remains responsible for those actions.

Continuing effectiveness of lease

Here, emphasize that the original lease terms are still effective to the assignee, except for the assignment.

Assignor’s representations and warranties

List the assignor’s promises under the assignment. Note that this is not a detailed list of services to be provided. Instead, this is the assignor’s assurance that the lease and the rental interest it’s providing are helpful (i.e., no one else lives or has an interest in the place, the lease is still in effect, the assignor is not behind in rental payments, etc.). If there are additional representations the assignor should be making, feel free to include those here.

Condition of premises

Here, mention that the premises are not warranted to be perfect or valuable in a particular way. Instead, the assignee is taking the rented property for what it is and is accepting it in that state.

Additional terms of assignment

This optional provision allows the assignor and the assignee to include any representations, warranties, or other provisions particular to their situation.

Interpretation

This section provides information that both parties were on equal footing in negotiating the consent to assignment. In many cases, a contract is interpreted favorably by the individual who did not draft it. This clause clarifies that both parties were involved in the drafting, so the document should not be read in favor of (or against) either.

Here, list the addresses to which all official or legal correspondence should be delivered. This can be the tenant’s business address or the mailing address for both the assignor and the assignee.

Modification

This section indicates that any changes to the document are only effective if they are made in writing and signed by both parties.

Governing law

This section allows the parties to choose the state laws used to interpret the document.

Counterparts; electronic signatures

This section explains that even if the parties sign the assignment in different locations or use electronic devices to transmit signatures (e.g., fax machines or computers), the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city—much less the same room — this provision ensures that business can be transacted efficiently without sacrificing the validity of the agreement as a whole.

Entire agreement

This clause mentions that the document parties are signing is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a party from arguing that other enforceable promises exist, but it can provide you some protection from these claims.

Landlord’s consent and release 

Review the terms of the original lease agreement to determine whether or not the  landlord’s consent  is required to make the assignment effective. This is usually the case. If so, have the landlord sign the document.

Frequently asked questions

What is the purpose of an assignment of lease.

Whether it's because it's time to move to a new space or city, business isn't booming, a company gets sold, or otherwise, sometimes commercial tenants must leave a lease before it ends. And sometimes, they may want to transfer the responsibilities of their lease to someone new. A lease assignment occurs in this case.

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

• Who the old tenant is : Have their name and contact information ready
• Who the new tenant is : Have their information available

What is the difference between an assignment and a sublease?

An assignment transfers one party's interest in an agreement to a third party. In this case, the original tenant gives all their interest to a new tenant. That new tenant steps into the shoes of the old tenant and the old tenant is released from most of their obligations under the lease (although this can be changed by agreement).

This is not the same as a sublease.  Under a sublease , a third party is granted only those specific rights provided in the sublease. The original tenant remains ultimately liable for residual obligations under the lease or any failures of the new tenant to meet their obligations. This means that the original tenant will be responsible (in equal measure with the new tenant) for any skipped rent payments or damage to the property.

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