An assignment is a transaction where the lease and all its corresponding rights and obligations are transferred from the tenant to another party (typically referred to as a “assignee”). A sublease is a transaction where the tenant enters into a subordinate lease agreement (a “sublease”) with a party (typically referred to as a “subtenant” or a “sublessee”). The subtenant agrees to perform some or all of the tenant’s obligations under the original lease, however the tenant remains primarily responsible to perform all of its obligations under the original lease.
Assignments and subleases are typically addressed in the same lease article. It is important for a tenant to carefully review the assignment/sublease article(s) of a lease since it may be utilized as part of a tenant’s Exit Strategy. In the event a tenant sells its business, the lease will be transferred as part of the sale so it is important to determine whether landlord’s consent to the transfer is necessary and the process to obtain any such approval. If a tenant decides to sublease all or a portion of its space, it is important to be familiar with the sublease process set forth in the lease.
As a landlord, you want to ensure that you are aware of who is occupying the premises and how they are using the premises. Having a procedure set forth in the lease describing what a tenant must do in order to assign the lease or sublease the premises will ensure that a tenant either follows the procedure set forth in the lease or risk being held in default under the lease should they do not follow the procedure.
Karl Dowden has experience representing commercial tenants looking to assign or sublease their commercial or office space as well as representing those assignees and subtenants entering into assignments and subleases.