Lease Assignment Agreement
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A Lease Assignment Agreement is a short document that allows for the transfer of interest in a residential or commercial lease from one tenant to another. In other words, a Lease Assignment Agreement is used when the original tenant wants to get out of a lease and has someone lined up to take their place.
Within a Lease Assignment Agreement, there is not that much information included, except the basics: names and identifying information of the parties, assignment start date, name of landlord, etc. The reason these documents are not more robust is because the original lease is incorporated by reference , all the time. What this means is that all of the terms in the original lease are deemed to be included in the Lease Assignment Agreement.
A Lease Assignment Agreement is different than a Sublease Agreement because the entirety of the lease interest is being transferred in an assignment. With a sublease, the original tenant is still liable for everything, and the sublease may be made for less than the entire property interest. A Lease Assignment transfers the whole interest and puts the new tenant in place of the old one.
The one major thing to be aware of with a Lease Assignment Agreement is that in most situations, the lease will require a landlord's explicit consent for an assignment. The parties should, therefore, be sure the landlord agrees to an assignment before filling out this document.
How to use this document
This Lease Assignment Agreement will help set forth all the required facts and obligations for a valid lease assignment . This essentially means one party (called the Assignor ) will be transferring their rights and obligations as a tenant (including paying rent and living in the space) to another party (called the Assignee ).
In this document, basic information is listed , such as old and new tenant names, the landlord's name, the address of the property, the dates of the lease, and the date of the assignment.
Information about whether or not the Assignor will still be liable in case the Assignee doesn't fulfill the required obligations is also included.
Applicable law
Lease Agreements in the United States are generally subject to the laws of the individual state and therefore, so are Lease Assignment Agreements.
The Environmental Protection Agency governs the disclosure of lead-based paint warnings in all rentals in the States. If a lead-based paint disclosure has not been included in the lease, it must be included in the assignment. Distinct from that, however, required disclosures and lease terms will be based on the laws of the state, and sometimes county, where the property is located.
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A guide to help you: Tenants and Subtenants Obligations under a Sublease Agreement
Other names for the document: Assignment Agreement for Commercial Lease, Assignment of Commercial Lease, Assignment of Lease, Assignment of Residential Lease, Assignment Agreement for Lease
Country: United States
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Your Lease Assignment Agreement
ASSIGNMENT OF LEASE WITH CONSENT OF LANDLORD
THIS ASSIGNMENT OF LEASE dated this ________ day of ________________, ________
_________________________
(the "Assignor")
OF THE FIRST PART
_______________________
(the "Assignee")
OF THE SECOND PART
- This is an agreement (the "Assignment") to assign a residential lease in real property according to the terms specified below.
- The Assignor wishes to assign and transfer to the Assignee that lease (the "Lease") dated March 14, 2023, and executed by the Assignor as tenant and by _________________________ as landlord (the "Landlord").
IN CONSIDERATION OF the Assignor agreeing to assign and the Assignee agreeing to assume the Lease for the Premises, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, both parties agree to keep, perform and fulfill the promises, conditions and agreements below:
- The Lease governs the rental of the following described premises (the "Premises") to the Assignor: ______________________________________________
- Assigned Lease
- The Assignor assigns and transfers to the Assignee all of the Assignor's right, title, and interest in and to the Lease and the Premises, subject to all the conditions and terms contained in the Lease.
- Effective Date
- This Assignment takes effect on March 15, 2023 (the "Effective Date"), and continues until the present term of the Lease expires on March 16, 2023.
- Assignor's Interest
- the Assignor is the lawful and sole owner of the interest assigned under this Assignment;
- this interest is free from all encumbrances; and
- the Assignor has performed all duties and obligations and made all payments required under the terms and conditions of the Lease.
- Breach of Lease by Assignee
- Consent to this Assignment will not discharge the Assignor of its obligations under the Lease in the event of a breach by the Assignee.
- In the event of a breach by the Assignee, the Landlord will provide the Assignor with written notice of this breach and the Assignor will have full rights to commence all actions to recover possession of the Premises (in the name of the Landlord, if necessary) and retain all rights for the duration of the Lease provided the Assignor will pay all accrued rents and cure any other default.
- Governing Law
- It is the intention of the parties that this Assignment, and all suits and special proceedings under this Assignment, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of the State of South Carolina, without regard to the jurisdiction in which any action or special proceeding may be instituted.
- Miscellaneous Provisions
- This Assignment incorporates and is subject to the Lease, a copy of which is attached hereto, and which is hereby referred to and incorporated as if it were set out here at length. The Assignee agrees to assume all of the obligations and responsibilities of the Assignor under the Lease.
- This Assignment will be binding upon and inure to the benefit of the parties, their successors, assigns, personal representatives, beneficiaries, executors, administrators, and heirs, as the case may be.
- All rents and other charges accrued under the Lease prior to the Effective Date will be fully paid by the Assignor, and by the Assignee after the Effective Date. The Assignee will also be responsible for assuming and performing all other duties and obligations required under the terms and conditions of the Lease after the Effective Date.
- There will be no further assignment of the Lease without the prior written consent of the Landlord.
IN WITNESS WHEREOF the Assignor and Assignee have duly affixed their signatures under hand and seal on this ________ day of ________________, ________.
CONSENT OF LANDLORD
The Landlord in the above Assignment of Lease executed on the ________ day of ________________, ________, consents to that Assignment. The Landlord also agrees to the Assignee assuming after March 15, 2023, the payment of rent and performance of all duties and obligations as provided in the Lease.
Lease Assignment Information
Alternate names:.
A Lease Assignment is also called a/an:
- Assignment Agreement
- Lease Assignment Form
- Lease Transfer
A Lease Assignment can also be called a Commercial Lease Assignment or a Residential Lease Assignment depending on the type of property it is being used for. LawDepot's Lease Assignment can be used for residential or commercial properties.
What is a Lease Assignment?
A Lease Assignment transfers the rights and obligations of an existing lease from one tenant to another.
Who are the parties in a Lease Assignment?
Generally, there are two parties involved in a Lease Assignment:
- The Assignor: this is the tenant(s) listed on the property's current lease (the master lease) who, using the Lease Assignment Form, is transferring their rights and obligations from themselves to another tenant
- The Assignee: this is the tenant who is taking over the original tenant's (the assignor's) rights and obligations
Typically, a landlord does not sign the Lease Assignment itself, but their information may be included in the document and they may need to sign a consent allowing the assignor to assign the lease.
Why do I need a Lease Assignment?
A Lease Assignment is typically used when a tenant wishes to vacate a property before their lease expires . There are many reasons why tenants would need to use a Lease Assignment, for example:
- If a tenant was renting residential property, they may wish to transfer their lease because they need to relocate for work or personal reasons, reduce living costs, increase their living space, or purchase a home.
- If a tenant was renting commercial property, they may want to assign their lease because of company relocation, expansion, downsizing, or seasonal closure.
What is included in a Lease Assignment?
Typically, a Lease Assignment will contain information regarding:
- The type of lease (residential or commercial)
- The property's location
- Details about the assignor, assignee, and landlord
- The original lease term (start and end dates)
- The start date of the lease transfer
- Details about the assignor's continuing liability (i.e. whether the assignor will continue to be liable to the landlord after the lease is assigned to the assignee)
- Lead paint disclosure for residential rentals, if required
A Lease Assignment should also include a copy of the master lease (the original lease for the property, signed by the landlord and assignor) or a copy should be provided to the assignee for the assignee's records.
Is a landlord's consent required for a Lease Assignment?
You should have the consent of your landlord when you assign a lease.
The master lease may state whether a tenant is permitted to assign their lease and if consent is needed. However, if it does not, it is a good idea to speak with your landlord and create a Landlord's Consent to Lease Assignment before transfering the lease to a new tenant.
Who is liable in an assigned lease?
Your Rental Agreement may contain a clause about assignment and continuing liability. If it does not, the landlord usually decides whether the assignor will be responsible for damages or other breaches of the lease caused by the assignee (or the assignee's guests, clients, or customers).
The Lease Assignment should note whether the assignor is liable for the assignee's conduct (for instance, paying for property damages, missed rent payments, fines from not complying to noise ordinances, etc.). If the assignor has been released from liability, the landlord can only seek compensation for property damage or other lease breaches from the assignee.
In contrast, if the assignor remains liable under the original lease, then the landlord can seek recourse from both the assignee and assignor.
If the assignee is liable but the landlord tries to collect payment from the assignor, the Assignment Agreement will help protect the assignor by stipulating that the assignor can seek recourse from the assignee.
What is the difference between assigning and subletting a lease?
Both assignment and subletting involve finding a new tenant, but there are some key differences.
An assignment is when the tenant transfers their lease interest to a new tenant using a Lease Assignment. The assignee takes the assignor's place in the landlord-tenant relationship, although the assignor may remain liable for damages, missed rent payments, and other lease violations.
A sublease is when the tenant temporarily hands over the rights and obligations of a lease to a third party by using a Sublease Agreement. Although the landlord typically isn't a party to the agreement, they can still hold the tenant responsible for the terms of the original lease.
Before deciding to assign or sublet your rental property, it's important to review your Lease Agreement (the master lease) for any rules and discuss your options with your landlord.
Related Documents:
- Landlord's Consent to Lease Assignment : this consent is used when tenants need to obtain written approval from their landlord before they assign their lease to a new tenant
- Commercial Sublease Agreement : this agreement is used by commercial property tenants and allows them to rent out all or a portion of their rented property to another tenant
- Residential Sublease Agreement : this agreement allows a residential tenant to rent all or a portion of a leased property to another tenant
- Landlord's Consent to Sublease : this consent is used when tenants need to obtain written approval from their landlord before creating a Sublease Agreement
Frequently Asked Questions:
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Assignment of Lease Form
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Updated July 11, 2022
A lease assignment allows a tenant to “assign” and transfer the name of the lease, often the tenant, to someone else. The landlord must approve the tenant and, if accepted, an assignment will be executed by both parties. The assignee will be the new tenant and the original tenant will be released from the lease.
Residential (Example)
When a tenant can no longer make the monthly rent payments and knows someone that can replace them in the apartment. The landlord will be contacted and the new tenant will be screened by their credit score and background. If approved, an assignment will be written and ready for signature.
Commercial (Example)
When a business is purchased and the old owner has no interest in the property. The landlord will be notified that the business is no longer owned by the tenant and will issue a lease assignment to make the new owner personally liable for the lease.
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Free Lease Assignment Agreement Template for Microsoft Word
Download this free Lease Assignment Agreement template as a Word document to easily assign a lease to another party with consent from the landlord.
Lease Assignment Agreement
THIS ASSIGNMENT OF TENANCY AGREEMENT dated this [Insert date]
[Insert name] (the “Assignor”)
– AND-
[Insert name] (the “Assignee”)
A. This is an agreement (the “Assignment”) to assign a residential tenancy agreement in real property according to the terms specified below.
B. The Assignor wishes to assign and transfer to the Assignee that tenancy agreement (the “Tenancy Agreement”) dated June 11, 2020, and executed by the Assignor as tenant and by _________________________ as landlord (the “Landlord”).
IN CONSIDERATION OF the Assignor agreeing to assign and the Assignee agreeing to assume the Tenancy Agreement for the Premises, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, both parties agree to keep, perform and fulfill the promises, conditions and agreements below:
1. The Tenancy Agreement governs the rental of the following described premises (the “Premises”) to the Assignor: ______________________________________________
Assigned Tenancy Agreement
2. The Assignor assigns and transfers to the Assignee all of the Assignor’s right, title, and interest in and to the Tenancy Agreement and the Premises, subject to all the conditions and terms contained in the Tenancy Agreement.
Effective Date
3. This Assignment takes effect on June 11, 2020 (the “Effective Date”), and continues until the present term of the Tenancy Agreement expires on June 11, 2020.
Assignor’s Interest
4. The Assignor covenants that:
a. the Assignor is the lawful and sole owner of the interest assigned under this Assignment; b. this interest is free from all encumbrances; and c. the Assignor has performed all duties and obligations and made all payments required under the terms and conditions of the Tenancy Agreement.
Breach of Tenancy Agreement by Assignee
5. Consent to this Assignment will not discharge the Assignor of its obligations under the Tenancy Agreement in the event of a breach by the Assignee.
6. In the event of a breach by the Assignee, the Landlord will provide the Assignor with written notice of this breach and the Assignor will have full rights to commence all actions to recover possession of the Premises (in the name of the Landlord, if necessary) and retain all rights for the duration of the Tenancy Agreement provided the Assignor will pay all accrued rents and cure any other default.
Governing Law
7. It is the intention of the parties that this Assignment, and all suits and special proceedings under this Assignment, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of the State of New South Wales, without regard to the jurisdiction in which any action or special proceeding may be instituted.
Miscellaneous Provisions
8. This Assignment incorporates and is subject to the Tenancy Agreement, a copy of which is attached hereto, and which is hereby referred to and incorporated as if it were set out here at length. The Assignee agrees to assume all of the obligations and responsibilities of the Assignor under the Tenancy Agreement.
9. This Assignment will be binding upon and inure to the benefit of the parties, their successors, assigns, personal representatives, beneficiaries, executors, administrators, and heirs, as the case may be.
10. All rents and other charges accrued under the Tenancy Agreement prior to the Effective Date will be fully paid by the Assignor, and by the Assignee after the Effective Date. The Assignee will also be responsible for assuming and performing all other duties and obligations required under the terms and conditions of the Tenancy Agreement after the Effective Date.
11. There will be no further assignment of the Tenancy Agreement without the prior written consent of the Landlord.
IN WITNESS WHEREOF the Assignor and Assignee have duly affixed their signatures under hand and seal on this [Insert date]
SIGNED BY THE ASSIGNOR
_____________________________ Assignor: _________________________
in the presence of (Name of witness) _______________________
(Signature of witness) _____________________________
SIGNED BY THE ASSIGNEE _____________________________ Assignee: _______________________
in the presence of (Name of witness) ___________________
(Signature of witness) _______________________________
CONSENT OF LANDLORD
The Landlord in the above Assignment of Tenancy Agreement executed on [Insert date] consents to that Assignment. The Landlord also agrees to the Assignee assuming after [Insert date] the payment of rent and performance of all duties and obligations as provided in the Tenancy Agreement. Dated: [Insert date]
Landlord: _________________________
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Lease Assignment Agreement Template
Used 4,906 times
Prepared by:
Assignee Name: [Assignee.FirstName] [Assignee.LastName]
Company: [Assignee.Company]
Phone: [Assignee.Phone]
Email: [Assignee.Email]
Address: [Assignee.StreetAddress] [Assignee.City] , [Assignee.State] [Assignee.PostalCode]
Prepared for:
Assignor Name: [Assignor.FirstName] [Assignor.LastName]
Phone: [Assignor.Phone]
Email: [Assignor.Email]
Address: [Assignor.StreetAddress] [Assignor.City] , [Assignor.State] [Assignor.PostalCode]
This Lease Assignment Agreement (hereinafter referred to as the "Agreement") made and entered into this [Document.CreatedDate] by and between:
Name: [Assignor.FirstName] [Assignor.LastName] [Assignor.Company] (hereinafter referred to as " Assignor "), and
Name: [Assignee.FirstName] [Assignee.LastName] [Assignee.Company] (hereinafter referred to as " Assignee ")
Assignor and Assignee are hereinafter referred to as “ Parties ” collectively in this Agreement.
Details of the Lease
1. property address:.
The leased property is located at the following address: [Property.Country] [Property.State] [Property.StreetAddress] [Property.City] [Property.Phone] .
2. Landlord:
The landlord of the Property is [Landlord.FirstName] [Landlord.LastName] [Landlord.Company]
The tenant of the Property is [Assignor.FirstName] [Assignor.LastName] [Assignor.Company]
The term of the lease is from (insert the date on which the lease was effective) to (insert the date when the lease ends as per the contract).
5. Purpose:
The Property is leased for the following purpose: (insert the purpose of leasing, for example, office space, business premises, residential property)
6. Rental amount:
The monthly rental amount is (insert rental amount in words) , and payable on the (insert the day, example, 7th, 15th) day of each month.
Affirmations
Assignor affirms that they have:.
Leased the Property described above from the landlord who is currently in valid possession of the Property;
Legal right and authority to sublease the Property and to enter into this Agreement;
Read and agree to the terms and conditions of this Agreement;
Not received any notice from the landlord or any other person or authority that the Assignor’s leasehold interest in the Property is in jeopardy; and
Is not in default of any of the terms and conditions of the Lease.
No improvements were made in the Property by the Assignor without prior authorization from the Landlord.
Assignee affirms that they have:
Read, understood, and agree to the terms and conditions of this Agreement;
Have the financial capacity to make all payments that may become due under the terms of the Lease; and
Understood that the acceptance of this Agreement does not and will not violate any agreement between the Assignee and any other person or entity.
1. Execution of Lease by Assignee:
This Agreement is not effective or binding until the Assignee has executed the Lease.
2. Notice to the landlord:
The Parties agree to give written notice of this Agreement to the landlord within (insert number of days, example: 3 days) days after the execution of this Agreement by the Parties.
3. Waiver of rights:
Assignor waives any rights they may have, including the right of redemption, re-entry, and demand for possession, against the Assignee if the Assignee does not make timely payments as per the Lease.
Rent and security deposit
Security deposit of the Property is currently (insert amount in numbers) and shall be paid as per the current lease agreement.
Rent of the Property is currently (insert amount in numbers) and shall be paid as per the current lease agreement.
Rent through the Agreement
Exactly (insert number, example: 3 days, 7 days) days after the date of this Agreement, the Assignor must pay to the Assignee any rent that may become due under the Lease up to the date on which the Assignee takes possession of the Property, which must be evidenced by a receipt or other written acknowledgment issued by the Landlord.
Termination and Non-Transferability
This Agreement may not be terminated except by mutual agreement of the Parties. Subsequently, the Assignee may not sublease, hypothecate, lend, sell, sublet, borrow on, pledge, or mortgage the Property.
Indemnification
The Assignee agrees to indemnify and hold the Assignor harmless from and against any claims, costs, losses, damages, liabilities, and expenses (including reasonable attorneys' fees and costs) arising out of or in connection with any claims or suits based on allegations that arise.
Governing Laws
This Agreement shall be governed by and construed under the State of (state) laws.
Agreed and Accepted
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
[Assignee.FirstName] [Assignee.LastName]
[Assignor.FirstName] [Assignor.LastName]
Lease Assignment Agreement: Templates & More
Transfers the assignor's rights and obligations to the assignee, with the landlord's consent, and should include negotiated clauses such as sharing of excess rents, assignment review fee, recapture rights, damages and indemnification
Also known as:
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Residential Lease Assignment Agreement Template
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What is a Lease Assignment Agreement
Dorna Moini, JD
Founder, Gavel
Dorna Moini is the CEO and founder of Gavel, a no-code platform for building document automation and client-facing web applications for the law. Prior to starting Documate, Dorna was a litigator at Sidley Austin. There, in her pro bono practice, she worked with legal aid organizations to build a web application for domestic violence survivors to complete and file their paperwork, which led to the idea for Documate. Dorna is on the Legal Services Corporation Emerging Leaders Council and a member of LAFLA’s Advisory Board. She was named an ABA Legal Rebel and a Fastcase 50 honoree. She also teaches the Legal Innovations Lab at USC Law School.
A lease assignment means that an existing tenant, also known as the assignor, has transferred its interest in a lease to a different tenant, the assignee. This is different from a sublease. In a sublease agreement, the original tenant acts as a landlord and allows a new tenant to use the property, but the original tenant remains liable. In an assignment, the assignor is usually released from liability and removed from the lease.
Lease assignments are more common in a commercial lease setting, but they are also legal for a residential lease. A lease assignment agreement is a formal and legally binding agreement transferring the assignor’s rights and obligations to the assignee. The landlord, or owner of the property, will want to make sure that the assignee is capable, financially and otherwise, of paying the costs and otherwise complying with the obligations of the lease or other rental agreement that’s in place with the assignor.
Parties to a Lease Assignment Agreement
The parties to a lease assignment are the:
- Assignee (new tenant)
- Assignor (original tenant), and
- Landlord (who is usually consenting to the assignment from one tenant to the other).
The parties should negotiate the agreement among themselves, but the assignor generally wants to be released from liability, and the assignee will take on the assignor’s responsibilities. Usually, but not always, the landlord is required to consent to the agreement. The landlord normally wants to review the assignee’s financials and confirm that the assignee can afford to pay rent and take on the other obligations under the lease. In certain circumstances, the landlord may not be required to consent, for example, when the assignor is acquired by a different company. The lease may be assigned to the new owner, as part of the business operations. The assignee will be taking over the lease obligation from the assignee, including all of the liability, financial and otherwise.
The assignee will replace the assignor under the lease, so the relationship between landlord and assignor is dissolved, and the landlord-assignee becomes a landlord-tenant relationship. Under certain circumstances, the assignor may remain liable- for example, environmental indemnifications, unpaid amounts, or other obligations that the assignee is not willing to take on as part of the transfer.
The parties need to negotiate closely and confirm what rights, if any, are being transferred or retained. Using a template may (or may not) be thorough enough to cover all of these changing factors, and an attorney can be really expensive. Legal apps combine the best of both worlds: the protection and guidance of a law firm through guided logic, but the affordability and convenience of a downloadable template.
Why is a Lease Assignment Agreement Important for Transferring the Lease Interest?
Tenants shouldn’t just switch places on a handshake basis - the original lease usually has the terms and conditions under which an assignor's interest, rights and responsibilities can be assigned to an assignee, and the landlord usually needs to consent. After all, the landlord needs to know who is actually using the property.
If the assignment isn’t done properly, then the landlord could initiate legal proceedings against assignor and assignee for violations of the lease, and the law, and will most likely win. The lease assignment agreement will clearly spell out what liabilities (if any) the assignor is retaining and what liabilities the assignee is taking on, and the landlord will consent to the transferring of such liabilities.
If not done correctly, then the lease may allow the landlord to void the assignment and to proceed against the assignor for lease violations and against the assignee for trespass, among other charges.
Residential Lease Assignment v. Commercial Lease Assignment
While lease assignments are more common in a commercial than a residential setting, they can happen in both types of property. For both types of leases, the parties should read the original lease and review the provisions regarding:
- Conditions of landlord’s consent. Does the landlord have discretion to grant the assignment? Are there any documents the parties have to provide to the landlord to transfer the lease interest?
- The process of receiving approval , including the time for the landlord to consent to the assignment to the new tenant and give their prior written consent.
- Any fees , such as a review or transfer fee, legal fees, or a change in a security deposit amount.
For a residential lease assignment:
For residential property, this process is more rare. Specifically:
- Assignments are often completely prohibited, but
- A landlord may agree to an assignment of the rented property based on certain circumstances.
For a commercial lease assignment:
For commercial property, the landlord will at a minimum review the following factors:
- The proposed use of the assignee (such as retail or office use).
- The creditworthiness of the assignee.
A commercial tenant may not need to get the landlord’s consent at all to effect the assignment of lease. Most leases will have an exception for a corporate transfer (usually defined as a corporate sale or the sale of a controlling interest in the stock or the tenant’s majority assets) to a related entity. Therefore, a merger or acquisition may be an exception to the rule that the landlord’s consent is required. The landlord may be entitled to notice of the transfer within a certain period of time either before or after the transfer happens, and those deadlines are important.
What Should You Negotiate? Typical Lease Assignment Clauses to Negotiate
While lease assignment agreements will vary based on the individual circumstances and the governing law, there are a few clauses that will show up in virtually every lease assignment agreement (especially a commercial one), and the parties should be prepared to negotiate accordingly:
1. Sharing of Excess Rents.
Many states have passed legislation that prohibits landlords from withholding consent due to a lack of additional economic benefit. This means the landlord cannot condition its consent on receiving additional money, although the landlord does not have to agree to receive less rent as a condition of consent to a lease assignment.
Therefore, many leases require at least the rent under the then-current lease to be paid, and if there is an economic benefit to the assignor, then the landlord wants part of that additional amount. It’s recommended that the assignor recover its own costs before having to share any additional or excess profit with the landlord.
2. Assignment Review Fee.
Most leases will require the assignor to reimburse the landlord for legal and administrative expenses incurred in reviewing the request for consent and document preparation fees. Ideally, the parties involved will have negotiated the fee, and it will be included in the original lease agreement. The assignor may negotiate to pass on some or all of the landlord’s fees to the assignee, as well.
3. Recapture Rights.
In the event that the assignor wishes to assign the lease to another tenant instead of consenting, the landlord may terminate the existing lease and recapture the property in order to turn around and enter a new direct lease with the assignee. This is more common if the landlord wants to increase the amount of rent it will receive or in the event that the use of the property has changed.
The commercial tenant should include a lease provision that if the landlord attempts to recapture the property before a complete transfer, the request for assignment can be rescinded. Then the parties can consider other options, such as subleasing.
4. Damages.
Does the assignor remain responsible after the effective date of the contract or is the assignee assuming all liability? The parties must review the lease assignment and confirm if the assignor retains liability for any damages due to its actions or omissions.
Alternatively, the assignee may take on the assignor’s liability, usually as part of the negotiations regarding funding or other considerations. The key here is for the assignee to know the full extent of the liabilities it is taking on, so due diligence is paramount.
5. Indemnification.
All of the parties will want to know what they are getting, The landlord wants a new tenant who will pay rent and abide by the lease; the assignor wants to be released from liability; the assignee wants to have all the rights to use and occupy the property and become the lawful and sole owner of the lease. The landlord will rarely agree to absorb any costs it can pass on to the tenants. That means that if there is liability, responsibility for it needs to be negotiated between the assignor and assignee. For example, if the assignor knows about deferred maintenance, accrued rents, late rent payments, or other outstanding obligations, then the assignor is responsible for it unless the assignee takes on that responsibility.
The assignee may just really want the property and be willing to absorb the costs, especially if they are nominal, or the assignor may agree to reimburse or otherwise pay the assignee to do whatever the assignor has left undone. This clause should be negotiated carefully - whatever the parties agree to will be enforceable, absent fraud or misrepresentation.
Practical Considerations for Your Lease Agreement
Valuable consideration.
All contracts, including lease assignments, require valuable consideration, which means one party pays a price in exchange for the terms of the contract. In a lease assignment context, that usually means that the assignee will agree to take on the liability of paying rent (and potentially other negotiated liabilities) in return for having complete control of the property and removing the assignor from the lease. The assignee wants the property in which to operate or live, and the assignor does not want to occupy the property anymore, and that’s usually considered sufficient for contract purposes.
Fees and Obligations
The assignor and assignee should budget not only for their own legal costs but to cover the costs of the landlord as well. The landlord has to invest resources in reviewing the assignment of lease, reviewing related documents, and investigating the suitability of the assignee. Most savvy landlords will not want to be out of pocket for these expenses and will require payment or reimbursement in order to perform these actions. As to who will actually pay the costs - well, that’s a negotiation between the assignor and assignee.
Governing Law
If the parties and the premises are all located in different places, then what rules control in resolving disputes? Most parties will agree to the jurisdiction where the premises are located, even if the business itself or the property owner are located in different states.
For commercial leases, this can be negotiated, but residential leases are virtually always subject to the law where the property is located, no matter where the owner lives. The jurisdictional limits are likely clearly stated in the original lease, especially if it is not the location where the property is. It can specify the state, as well as the county and even the court of jurisdiction, and there may be key differences as to what is enforceable.
How to Draft Your Lease Assignment Agreement to Avoid Disputes Before They Occur
Lease assignment agreement disputes usually occur when the parties don’t have an agreement tailored to their transaction. It’s usually fairly simple to identify the business terms of a lease assignment, but it can get a little trickier when determining non-business terms, such as indemnification and liability. It makes sense to invest in a lease assignment agreement that has been reviewed by someone with legal knowledge.
The parties can best protect themselves by performing their due diligence - reading the lease and miscellaneous provisions and understanding what rights and obligations each party has under the lease, any continuing liability with respect to the real property, and what the assignee agrees to.
Then the assignor and assignee need to agree if the assignee is taking on all of the liability, which is typical, or if there are items that need to be specifically excluded or otherwise negotiated.
Finally, the parties need to approach the landlord with their agreement, ask for the landlord to consent to the assignment and be prepared to provide proof of financial capabilities. If these steps are followed and documented properly, the chances of a lease assignment dispute, and accompanying litigation, are far reduced.
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