lease assignment vs sublease

What is Assignment of Lease and How It Differs from Subletting

The assignment of lease (and rent) is a foggy topic that is often confused with subletting. Let's clear the air once and all right now. Learn the differences between a lease assignment and sublease so you can make the right choice.

What is Assignment of Lease? - The Important Basics

Let's begin by introducing the 3 players in a lease assignment - The landlord, the original tenant (assignor) and the new tenant (assignee). The original tenant has an unexpired lease agreement with the landlord and he wants out. Since the original tenant can't just break the agreement and walk off, what he does is to get a new tenant to swap places... and take over all his rights and obligations for the remainder of the lease period. So if the original tenant signs a 1 year commercial lease and the business goes bust after 8 months, the new tenant will be assigned a 4-month commercial lease (with the same terms and conditions as the original agreement). Now here's the big catch: Even though the original tenant has handed over all his duties and obligations to the new tenant, he is not off the hook... unless the landlord agrees to release him from all liabilities. If the new tenant stirs up trouble, our dear original tenant will find himself in hot soup as well. Of course, whether the original tenant is allowed to pull this assignment trick out of his hat is a whole new matter. Knowing for sure is actually simpler than most people think: First, examine your local landlord tenant laws for any lease assignment rules. Most of the time, landlords are given the right to allow or disallow assignments but once in a while, the local law let tenants have the final say instead. If there's no mention of lease assignments in your law text, then your rental lease agreement shall dictate the terms.

Difference Between Lease Assignment and Subletting

When it comes to subletting vs assignment of lease, there's often a massive mix-up. Sometimes even real estate professional get it wrong by assuming them to be one and same thing. However if you dig deeper, you will find that the differences are not just numerous, but important as well. Let's begin by dragging the landlord into the picture. An assignment of lease launches the new tenant into a direct relationship with the landlord - The landlord collects rent straight from the new tenant and deals with the new tenant directly on all lease issues. So in this case, the original tenant gets to take back seat and doesn't have to manage the new tenant actively. On the other hand, there's no direct relationship between the landlord and new tenant (subtenant) in a sublease. Instead the original tenant plays mother goose and is responsible for collecting rent from the subtenant and making sure that he's following the lease rules. When you compare the two, a sublease is a lot more hands-on for the original tenant. No matter which path you take, you will still want a good new tenant who pays the rent on time and follows the lease rules to the agreement. For the golden rules on screening tenants and running credit checks, Click here for our guide to running tenant credit checks. When you have a lease assignment, the terms and conditions of the lease remains largely unchanged - It's almost like taking the original lease agreement and swapping the tenant's name with another. With a sublease, there's more breathing space - The original tenant can decide how much rent to charge, how long the subtenant is going to stay or even collect security deposit... as long as it stays within the boundaries drawn by the original lease agreement between the landlord and original tenant.

Should You Choose Assignment of Lease or Sublease?

You are the Landlord - A lease assignment is recommended in most cases. You will have more control over your new tenant (instead of leaving matters in the original tenant's hands and hoping that he would do a good job)... plus you still have the original tenant to cover your back in case anything goes wrong. You are the Original Tenant - Now this is a tricky one. If you want to someone to take over the entire lease and property for its remaining duration (e.g. your business goes belly-up and you no longer need the office), then help yourself to a lease assignment. If the landlord's consent is required for assignment (and he doesn't give the nod), you can always try offering him a lease assignment fee as a deal sweetener. However, if you are looking for someone to share the place (and rent)... or perhaps you need someone to cover the rent while you are overseas for a few short months, then a sublease would be ideal. You are the New Tenant - An assignment of lease works better for you most of the time. You won't be at the mercy of the original tenant (for example if he screws up and the landlord terminates the original lease agreement, your sublease might also go up in flames). But if you only want to rent part of the property... or don't want to tie yourself down for the remaining lease duration, then you are better off sticking to a sublease. Now that we have covered the topic of assignment vs sublease, go ahead and take your pick - Click here for an assignment of lease form or Click here for a sublet agreement instead.

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After you have completed the often long process of screening and moving in a new tenant, sometimes tenants inform you that they wish to end their lease early, typically due to reasons such as a job change or moving in with a significant other. This can be disheartening when you have put in the work to get the vacancy filled, and it may be tempting to minimize the additional work you may have to do to get the unit rented again by agreeing to a tenant’s proposal to sublease or assign their tenancy to a new person of their choosing. While there can be benefits to subleases and assignments, and in some places you cannot outright ban or unreasonably refuse a sublease, there are some pitfalls to be aware of with both options, as well as an alternative that may be preferable. It has also become increasingly popular for tenants to use their units for short-term vacation rentals, a practice which additionally carries a number of downsides for landlords.

When a tenant wants to leave their lease early or temporarily, and proposes to have a substitute tenant of their choosing live in the rental in their place and pay rent to the original tenant, this is called a sublease. For example, your original tenant may be a college student who plans to study abroad for a semester, but wishes to return after that. Another example may be if the original tenant wishes to rent out part of the unit, perhaps just one bedroom, in order to help them cover their expenses. In order to give you more control of these situations should they arise, it is best to have a clause in your lease specifying whether subleases are allowed, and if so, setting forth a requirement for the tenant to obtain your written permission or meet other criteria before subleasing the rental. Be sure to check state and local law regarding subleases, as some jurisdictions do not allow you to unreasonably deny requests to sublease, even if your individual lease does not permit them. It is also wise to require a subtenant to undergo the same screening process as the original tenant with regard to credit history, income, and other factors, but as always you should not make your decisions based on discriminatory factors.

Landlords should thoroughly screen potential subtenants and assignees even if the time left on a lease or periodic rental agreement is short. A bad subtenant or assignee can wreak a lot of havoc in a short amount of time or even refuse to leave once the lease or rental agreement is up.

The primary advantage of allowing a sublease is that you will presumably have an uninterrupted stream of income for the rental unit, which won’t sit vacant while you find a new tenant. Especially if the sublease request has come from a good and trustworthy long term tenant, then it may be worthwhile to grant the request and trust their judgment regarding who the subtenant is, subject to meeting your screening requirements. Your original tenant will also remain responsible for any failure to pay rent during the subtenancy, as well as any damage to the property. The downsides of allowing a sublease include that because the original tenant, rather than you, will be the subtenant’s landlord, it may be difficult to enforce the terms of the lease in the event of any violations. The subtenant may also refuse to leave at the agreed-upon time, potentially making it necessary for you to evict both them and the original tenant.

Assignments

An assignment is similar to a sublease in that it involves someone new taking the place of the original tenant, but the original tenant in these cases does not intend to return. The assignee assumes the legal place of the original tenant in the lease, meaning that they are renting from you rather than the original tenant. This means that the assignee is typically responsible for all of the original tenant’s general obligations under the lease, which allows you to pursue legal action against them in the event of a violation. Further, if the assignee fails to pay rent , you can actually pursue payment from the original tenant. Therefore, an assignment allows you the advantage of an uninterrupted supply of income for the unit without requiring you to do as much work to find a new tenant, and permits you to hold the original tenant responsible if the assignee does not follow through on their obligation to pay rent.

• The original tenant remains liable for the rent (the subtenant is liable to the original tenant)
• The original tenant remains liable for lease violations
• The landlord must evict the original tenant in order to evict the subtenant

Assignment:

• The assignee becomes liable for the rent, and the original tenant is only liable if the assignee does not pay
• The assignee becomes liable for lease violations
• The assignee can be evicted for any reason for which the original tenant could have been evicted

Creating a New Tenancy

While allowing a sublease or assignment may be advisable in some situations, in many cases the best and simplest option is to terminate the original tenant’s lease in writing and begin a new lease with the new tenant. This may still allow you to take advantage of the original tenant’s legwork in identifying a replacement tenant provided that the new tenant meets your requirements, but gives all the parties the added benefit of clarity when it comes to the legal relationship between you and the new tenant, especially if things go awry after they move in.

Short-Term Rentals

Particularly in competitive rental markets and large cities, tenants are turning to short-term rental services like Airbnb to rent out the units they themselves rent, and make a profit by collecting a fee from their guests. Many landlords disfavor this practice due to the increased wear and tear on the rental, people they haven’t screened using their property, and possible liability issues, among other things. Further, a number of cities have begun to highly regulate if not outright prohibit short-term vacation rentals of this nature. If you do not wish to allow tenants to host short-term vacation renters, once you have checked your local laws on the topic, it is best to clearly prohibit this practice in your written lease or rental agreement, and distinguish this type of rental from more standard subleases.

Last reviewed October 2023

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Navigating the assignment of a residential lease

A landlord can assign his leases to a new buyer of his building. Likewise, a tenant may be able to assign his lease if he needs to relocate. Find out how to assign your lease and what you can do to protect yourself when doing so.

by   Ronna L. DeLoe, Esq.

Ronna L. DeLoe is a freelance writer and a published author who has written hundreds of legal articles. She does...

Read more...

Updated on: December 4, 2023 · 3min read

Assignment of lease by the tenant

Assignment of lease vs. sublease, assignment of lease by the landlord.

As a tenant, you may want to get out of your residential lease without paying the remaining rent. Likewise, if you're a landlord and sell your rental property, the buyer must now collect rent from the tenants, who may have no idea you sold the property. In both situations, assignment of a lease with a release for the tenant and assignment of leases with notice by the landlord accomplish these goals.

If you're the tenant and want to leave before the end of your lease term, you may be able to assign your lease to a third party if the landlord doesn't let you out of the lease. The third party then becomes the new tenant, who is bound by the terms of the original lease and pays rent to the landlord.

Most often, the lease won't permit assignment without the landlord's approval, but leases often state that the landlord cannot unreasonably withhold consent. As long as you produce a tenant who's shown a history of payment under prior leases and has been a model tenant, a landlord should consent to assignment.

The assignment of lease form should include places for the tenant-assignor, the new tenant-assignee, and the landlord to sign. If the master lease allows assignment, then the tenant doesn't need the landlord's permission; the tenant can sign an assignment of lease agreement without the landlord's signature.

If the landlord allows an assignment of the lease, you, as the tenant, also want him to sign a release stating that you're not responsible for the new tenant's failure to pay or for any damage she causes. Without such a release, you may still be liable for both.

When you, as the tenant, assign the lease, you sign an agreement that either reads “Assignment of Lease," “Lease Assumption Agreement," or “Assignment and Assumption Agreement." An assumption of the lease means that the new tenant assumes your obligations, such as paying rent and keeping the apartment in good condition.

An assignment of a lease transfers the tenant's entire rights in the property to a third party. With a sublease, on the other hand, the tenant transfers only a portion of the remaining lease. For example, if the original tenant has six months remaining on his lease and he gives the entire six months to a third party, the tenant is permanently assigning his rights to live on the property to the third party. If, however, the tenant allows that third party to stay at the premises for only three months, and the tenant intends to return after three months, he is subleasing the premises.

A landlord can assign the right to collect rent to someone who has purchased the property. An assignment of lease from the seller to the buyer allows the new landlord to collect rent from any and all current tenants in the building. The language in the landlord's assignment of lease agreement can include assignment of security deposits, if the parties agree to it. An assignment of leases by the landlord to the buyer affords protection to the buyer so he can collect rent.

An assignment of leases by the landlord to the buyer is meaningless if tenants aren't aware the landlord sold the property, which is why it's important for the assignor-landlord to give tenants proper notice. A notice of assignment of lease, which is a form signed by both the assignor-landlord and the assignee, or new landlord, is one way to give notice. Another way is to send a letter on the landlord's letterhead. Either way, the notice must include the new landlord's address and how rent is to be paid.

Both landlords and tenants who become assignors should sign a formal assignment of lease agreement, which an online service provider can prepare for you. If you're the tenant who has assigned your lease, try to get a release or you'll still be liable to the landlord. If you're the landlord, make sure you can count on the new tenant to pay the rent before you release the primary tenant from his obligations under the lease.

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Assigning vs. Subletting A Commercial Lease

Most commercial lease arrangements allow tenants to rent-out their usable space to a third-party renter.  Although this can be a cost-effective way to maximize commercial space, tenants must be careful: when a tenant decides to rent part or all of their commercial space to a third-party, they are fully responsible for the actions or inactions of the new renter.

When it comes to commercial real estate, a legally-binding agreement is often signed between a landlord and a tenant.  But when the tenant decides to sublet or assign their lease to a third-party, they become the sublessor, while the new third-party renter becomes the sublessee.  Sometimes, the sublessor and sublessee are referred to the primary and secondary tenant respectively.  

In any case, there’s only one legally liable party in the sublessor-sublessee relationship: the sublessor.  In other words, should the sublessee damage the property or fall-behind on payments, compensating the landlord is the primary tenant’s legal obligation.  Nonetheless, choosing a trustworthy and reliable third-party renter often results in a winning situation for both parties. 

Get a Lawyer to Review Your Lease

Can I Rent Out my Commercial Unit?

In most instances, tenants are indeed allowed to rent their commercial space to third-party renters.  However, this is usually up to the discretion of the landlord.  Likewise, subletting must be done in-compliance with local state- and municipal-laws.  

Before making any commitments to potential renters, tenants should ensure they are legally allowed to rent their usable space.  This determination often depends on three factors:

• State- and Municipal-Regulations 
• The Original Commercial Lease Agreement
• Landlord Consent

First—and perhaps foremost—tenants should review their local housing regulations.   Some areas require a landlord’s written-consent before tenants can sublet or assign their lease.  Even when states don’t make landlord-consent a prerequisite, landlords themselves often write provisions into the original lease that ensures permission is granted before subletting.  Thus, you’ll need to revisit the terms and conditions of your original commercial lease agreement.   

The original lease should contain specific language about subletting, however these provisions are oftentimes absent.  If subletting provisions are indeed missing, you’ll need to speak to the landlord directly.  So long as the landlord’s permission is granted and the arrangements are compliant with local laws, tenants are allowed to rent-out their unit to whom every they wish.  Primary tenants that meet these requirements typically have two options: they can 1) sublet their commercial lease, or 2) assign their commercial lease.

Subletting vs. Assigning the Lease

Subletting and assigning are two different ways to structure the relationship between a primary and secondary tenant.  Although the structures are similar, they have important practical differences.  

• Lease-Assignment: the complete transfer of rental rights from a primary tenant to a third-party renter (importantly, the primary tenant is still responsible for the terms of the original lease)
• Subletting:  the partial transfer of rental rights from a primary tenant to a third-party renter, usually for a temporary period of time or for only a portion of the usable space

When a tenant assigns their lease to a third-party renter, they are offering the entirety of their usable space without the intention of returning.  This is unlike a conventional sublease structure, which offers only part of the unit and usually for a temporary period of time.  

Why would a business owner want to assign their commercial lease?  Importantly, a tenant is legally obligated to carry-out the terms of their commercial lease agreement, regardless of the circumstances.  Lease-assignment is practical when original tenants cannot—for whatever reason—uphold their end of the lease.  For example, if a business owner signs a 3-year commercial lease, but goes out of business 2-years into the agreement, they’ll likely seek somebody to complete the final 12-months of the term. 

On the other hand, if a primary tenant is only interested in splitting their usable space or looking for a temporary third-party renter, subletting is the more practical option.  

Who is the Responsible Party?

The commercial lease between the landlord and tenant is a legally-binding document.  Regardless of the tenant’s situation, they are required by-law to carry-out the terms and conditions of the contract.  Even when a lease is assigned to a third-party renter, the primary tenant is still responsible for the rental obligations.  

Perhaps unsurprisingly, the same rules apply to subletting.  When a tenant sublets their usable space, they remain the sole responsible party; should the third-party renter fail to make payments or cause damage to the rental unit, the original tenant is responsible.

Verbal or written agreements between tenants and third-party renters are great for establishing rules and responsibilities, but are more-so personal arrangements and not legally enforceable.  For this reason, it’s imperative that choosing a third-party renter is given ample consideration—regardless if you’re assigning your lease or simply looking to sublet.  It’s not unfair to request bank statements, criminal histories, or credit reports before making a commitment to a secondary tenant.  

In some situations, landlords will in-fact release the original tenant from liability when the lease is assigned to a third-party renter, rendering the new renter responsible for the terms of the original lease.  This is sometimes called “permeant assignment” and is definitely worth exploring when considering lease-assignment.  Usually this stipulation is negotiated between the landlord and tenant; an experienced legal professional may be helpful in these situations.

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Assignment of Lease

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What is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

Get Help with an Assignment of Lease

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Meet some of our Assignment of Lease Lawyers

I am an attorney licensed in both California and Mexico. I offer a unique blend of 14 years of legal expertise that bridges the gap between diverse legal landscapes. My background is enriched by significant roles as in-house counsel for global powerhouses such as Anheuser-Busch, Campari Group, and Grupo Lala, alongside contributions to Tier 1 law firms. I specialize in navigating the complexities of two pivotal areas: AI/Tech Innovation: With a profound grasp of both cutting-edge transformer models and foundational machine learning technologies, I am your go-to advisor for integrating these advancements into your business. Whether it's B2B or B2C applications, I ensure that your company harnesses the power of AI in a manner that's not only enterprise-friendly but also fully compliant with regulatory standards. Cross-Border Excellence: My expertise extends beyond borders, with over a decade of experience facilitating cross-border operations for companies in more than 20 countries. I am particularly adept at enhancing US-Mexico operations, ensuring seamless and efficient business transactions across these territories.

I’m a semi-retired, long-time US attorney with substantial experience in business and corporate law. I counsel startups and small businesses, help them set up corporations or LLCs across the country and draft a variety of contracts and corporate documents.

I'm an attorney available to help small businesses in Georgia get started with initial business set-up, required filings, tax strategies, etc. I'm also available to draft, review, and negotiate contracts. I can draft and file real estate quit claims as well. My experience areas include small business startups, information technology, technology innovation, real estate transactions, taxes, community associations, intellectual property, electrical engineering, the business of video game development, higher education, business requirements definition, technology consulting, program management, and the electric utility industry. I work part-time for a local law firm and part-time in my solo practice. I'm also an adjunct professor at Southern New Hampshire University teaching business innovation and business law. In addition, I'm part owner, legal counsel to, and a board member of a virtual reality video game development company. I am a member of the Georgia Bar Association. Please reach out if you need attorney, documentation or consulting help in any of those areas!

I was born and raised in New York and am a dual national of the U.S. and France. I am admitted to the bar of New York where I have my base and I have also lived and worked in France and Italy for many years. My practice is virtual with most business conducted by video conference, email and phone calls. I meet clients, co-counsel and others in person at their locations as needed. I obtained my law degree from Boston University. My undergraduate studies were done at Fairfield University, the University of Florence and the American University of Paris. I served as general counsel to the French consulate in Boston from 1993 to 1999 representing the French government and French citizens living and doing business in New England. My clients have included the City of New York, the New York Stock Exchange and numerous dot coms, negotiating and drafting tech contracts and advising them on international business issues. In my asset recovery and investigation work, I have obtained multi-million-dollar judgments against defendants in fraud cases. Please visit my website: ptd-law.com

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Assignment, Subleasing, And Why It's Important To Negotiate The Right To Do Both

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In the market for commercial space? Chances are you’re focusing your efforts on sourcing a property that suits your current business requirements.

However, in today’s ever-changing economy/business climate, companies often need to upsize or downsize at short notice.

As a tenant, where does that leave you when locked into a long-term commercial lease?

Keep it flexible

It’s hard to anticipate whether you’ll be faced with breaking a lease before it happens. So, it’s important to keep your contract flexible by negotiating a subleasing and assignment clause into your agreement. This means you’ll be able to transfer all or part of your space to another tenant down the track if the situation calls for it.

What’s the difference between an assignment and a sublease?

Lease assignments and subleases are often viewed in a similar light. This is because both bank on a third party taking over a commercial lease. But, there are some important differences to consider:

Lease assignment

A lease assignment is when an entire property/space, including the existing tenant’s rights and interest in the commercial lease, is transferred over to a new party.

When it comes to leasing assignments, the new tenant takes on the rights and responsibilities of the assigning tenant. That means the original tenant is not liable anymore if the new tenant breaches the lease.

Lease assignment is best undertaken when:

• The whole lease can be disposed of
• The current lease has favourable terms that would be accepted by another tenant

Major hurdles when it comes to lease assignment:

• Requires upfront capital incentive
• Requires landlord consent

A sublease, on the other hand, is a separate contract between the original tenant and a subtenant. Unlike an assignment, a sublease only turns over part of a property. That means that the original tenant shares the rights and responsibilities to the premises.

A sublease may be preferable for tenants who wish to lease out part of their property to another company for the remainder of the lease term. It may also suit if a tenant needs to rent out the entire property for a period within their fixed-term lease.

In this case, the sublessee treats the sublessor as their landlord. In turn, the sublessor assumes liability on behalf of the sublessee.

Subleasing is best undertaken when:

• You're looking for a partial or temporary cost saving initiative
• Your landlord does not consent to or permit assignment
• Your current lease has. onerous clauses that another tenant wouldn’t agree to

Major hurdles when it comes to subleasing:

• Inherent security risks
• You’ll likely recuperate less than 50%-70% of the rent

You can learn more about some of the benefits of commercial subleasing here and what commercial sublessors should expect from subleasing here .

The importance of a lease assignment and sublease clause

The right to assign or sublet a premises comes down to the language used in the commercial leasing agreement.

If there is no prohibiting or limiting clause, a tenant does not need the landlord’s permission to do so. However, if the contract contains such provisions, the existing tenant needs to get the landlord’s consent. This can prove quite costly for the tenant, who may have to continue to pay rent even if they no longer occupy the premises.

Other options for breaking a commercial lease

The odds usually aren’t stacked in the tenant’s favour when it comes to breaking a commercial lease . However, if you used a tenant representation specialist before signing your contract, you should have received the right advice to protect yourself.

Break clause

Well negotiated leases may have a ‘break clause’, however, most landlords are reluctant to include one of these. A break clause basically lays out the circumstances and the manner in which a tenant can break a commercial lease early.

As with any contract, it’s up to the two parties to negotiate terms. One option may be to allow early termination of a lease if a new tenant with similar financial security takes over. This is similar to an assignment. However, the new tenant would take over the full liability of the remaining lease.

Pay out the commercial lease term

Not a desirable option for most tenants, however, there may be situations where it is the only choice. For example, if you were closing your business before the expiry of your lease term and there was no way to arrange an assignment or sublease, paying out the remainder of your term may be the only course of action.

Most people would consider this a worst-case scenario. This, again, highlights the importance of seeking the help of a tenant representation specialist prior to signing any commercial lease .

Commercial tenants should try to mitigate their risks upfront. Before signing a lease, or even at the heads of agreement stage , we suggest negotiating a clause which requires a landlord to act reasonably in the case of lease assignment or sublease.

Work with a commercial tenant advocate

Negotiating commercial lease terms can be tricky (even daunting at times). This is because most businesses only have to do it once every 5-10 years. Being able to negotiate provisions that would not otherwise be included may also prove challenging because landlords prefer not to limit their options.

Luckily, an experienced tenant representative will guide you through the lease negotiation process so your needs are met every step of the way. So, the next time you face a lease negotiation, let Tenant CS balance the playing field.

Considering breaking your lease? Whether you're exploring options like subleasing, assigning, or surrendering, a detailed property strategy is crucial.

Consulting with a tenant representation specialist is your best move, especially if there's less than a year remaining on your lease. At Tenant CS, we exclusively represent tenants, not landlords. Whether you need assistance with subleasing, exiting your lease, finding and negotiating a new lease, or undertaking a mid-lease rent review, appointing us can potentially save you hundreds of thousands of dollars over your lease term while protecting your interests.

Book a call with us today to discover how we can help you effectively negotiate your next lease or exit your current lease early !

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• Lease Assignment and Sublease

Assignment of Lease (Lease Transfer) vs. Sublease

by emre · Published October 4, 2014 · Updated October 12, 2014

The lease transfer (assignment of lease) is a foggy topic that is often confused with subletting. Let’s clear the air once and all right now.

What is Assignment of Lease? There are  the 3 players in a lease assignment: the landlord, the original tenant (assignor) and the new tenant (assignee).The original tenant has an unexpired lease agreement with the landlord and (s)he wants out. Since the original tenant can’t just break the agreement and walk away, what (s)he does is to get a new tenant to swap places… and take over all his/her rights and obligations for the remainder of the lease period.

So if the original tenant signs a 12-month lease and the tenant has to leave town or finds a better place after 8 months, the new tenant will be assigned a 4-month ease (with the same terms and conditions as the original agreement). Now here’s the big catch: Even though the original tenant has handed over all his duties and obligations to the new tenant, (s)he is not off the hook… unless the landlord agrees to release him/her from all liabilities. If the new tenant stirs up trouble, the original tenant will find himself/herself in hot soup as well. Of course, whether the original tenant is allowed to pull this assignment trick out of his hat is a whole new matter. Knowing for sure is actually simpler than most people think: First, examine your local landlord tenant laws for any lease assignment rules. Most of the time, landlords are given the right to allow or disallow assignments but once in a while, the local law let tenants have the final say instead. If there’s no mention of lease assignments in your law text, then your rental lease agreement shall dictate the terms.

Differences Between Lease Assignment and Subletting

When it comes to subletting vs. assignment of lease, there’s often a massive mix-up. Sometimes even real estate professional get it wrong by assuming them to be one and same thing. However if you dig deeper, you will find that the differences are not just numerous, but important as well.

Let’s begin by dragging the landlord into the picture. An assignment of lease launches the new tenant into a direct relationship with the landlord – The landlord collects rent straight from the new tenant and deals with the new tenant directly on all lease issues. So in this case, the original tenant gets to take back seat and doesn’t have to manage the new tenant actively.

On the other hand, there’s no direct relationship between the landlord and new tenant (subtenant) in a sublease. Instead the original tenant plays mother goose and is responsible for collecting rent from the subtenant and making sure that he’s following the lease rules. When you compare the two, a sublease is a lot more hands-on for the original tenant.

No matter which path you take, you will still want a good new tenant who pays the rent on time and follows the lease rules to the agreement. For the golden rules on screening tenants and running credit checks. When you have a lease assignment, the terms and conditions of the lease remains largely unchanged – It’s almost like taking the original lease agreement and swapping the tenant’s name with another.

With a sublease, there’s more breathing space – The original tenant can decide how much rent to charge, how long the subtenant is going to stay or even collect security deposit… as long as it stays within the boundaries drawn by the original lease agreement between the landlord and original tenant.

Should You Choose Assignment of Lease or Sublease?

You are the landlord – A lease assignment is recommended in most cases. You will have more control over your new tenant (instead of leaving matters in the original tenant’s hands and hoping that he would do a good job)… plus you still have the original tenant to cover your back in case anything goes wrong.

You are the Original Tenant – Now this is a tricky one. If you want to someone to take over the entire lease and property for its remaining duration , then help yourself to a lease assignment. If the landlord’s consent is required for assignment (and he doesn’t give the nod), you can always try offering him a lease assignment fee as a deal sweetener.However, if you are looking for someone to share the place (and rent)… or perhaps you need someone to cover the rent while you are overseas for a few short months, then a sublease would be ideal.

You are the New Tenant – An assignment of lease works better for you most of the time. You won’t be at the mercy of the original tenant (for example if (s)he screws up and the landlord terminates the original lease agreement, your sublease might also go up in flames).

Please fell free to contact us if you have additional questions.

Tags: assignee assignor landlord lease assignment lease transfer leasee Montreal rent sublease sublet tenant

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The differences between assignment and sublease.

By Don Catalano

An assignment is the transfer of the commercial tenant’s entire responsibilities in a lease. When a corporate tenant assigns its lease, the assignee takes over the tenant’s responsibilities under the lease and communicates directly with the landlord.

When a tenant decides to assign a lease, all his rights and responsibilities in the original lease agreement are released to the third-party assignee. Hence, the original tenant (the "assignor") will have to leave the unit and allow the new tenant to take over all of the leased building.

It is important to check the clauses in the original lease agreement before committing an assignment arrangement. In some leases, the original tenant will remain responsible for the terms of the lease, especially if the new tenant defaults on the lease agreement or causes damage to the property. You may want to check your lease agreement for the option to pursue a permanent assignment so you won't be responsible for expenses or damages.

When a corporate tenant subleases an office , the tenant is transferring all or a portion of the premises for less than the entire term of the lease. Subletting is when a corporate tenant gives another tenant the right to occupy a portion of the entire rental unit for a specific period.

Corporate tenants often sublease when market rents have fallen and parties needing space typically sublease to get space already built-out at a much lower rate than they could as a direct tenant.

Do Both Options Need a Landlord’s Consent?

Both subletting and assigning a commercial lease require the permission of the landlord or a representing agent; this is often expressly indicated in the lease agreement itself. Although most state laws prohibit landlords from withholding consent unreasonably. If the landlord objects to the sublet or assignment, then they must do so on reasonable grounds.

In the case of assignment, a vetting procedure which usually includes credit checks may be completed before formalizing the arrangement with the associated documentation.

Is Subletting or Assignment Right For My Company?

Whether to sublet your commercial property or assign a commercial lease depends entirely on your business situation. By subletting unused space, tenants can recover vital running costs and even improve the viability of their own business. Also, the original tenant remains the tenant and is responsible for all clauses in the original lease.

Assigning your commercial lease to a third party is a good option if you want to terminate your tenancy before the end of your agreement and vacate the premises completely. This is often a good idea if you are planning to sell or relocate your business . With an assignment, you will be absolved of all responsibilities as the original tenant from the date of assignment.

Here are a few other articles to check out:

8 working from home tips you should know, 4 site selection tips when looking for office space, 5 tips when moving your office from big cities to the suburbs, subscribe for more great cre tips hbspt.cta._relativeurls=true;hbspt.cta.load(121314, 'cd3ad71f-75e1-4533-9c5a-8e82767e7aba', {"usenewloader":"true","region":"na1"});.

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Assignment vs. Sublease: Difference and Comparison

Difference Between Assignment and Sublease

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Who typically initiates an assignment, can a sublease extend beyond the original lease's term, is it easier to reverse an assignment or a sublease, can a subleased space be further subleased, who does the landlord hold accountable in a sublease scenario, is rent typically the same in a sublease, can an assignment be partial, what happens to the original lease during an assignment, are there risks to subleasing, do all leases allow for assignments and subleases.

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Commercial Leases: Assignment vs. Sublet

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  What Does It Mean to Assign a Commercial Lease?

Today it is very common that when a business merges with another business or relocates to another location, that that business will still be stuck with their old location’s lease. Other instances in which a company will seek to assign or sublet their commercial lease is when a company outgrows its commercial location or cannot make their lease payments timely. In all of these situations it is very common for a business to try and assign or sublet their commercial lease.

Assignment of a lease refers to when one party of the lease transfers all the interest and obligations of the lease to a third party. Typically in commercial settings, a commercial tenant will assign their interest in the lease to another commercial tenant. Additionally, a landlord may also assign their interest in the lease to another landlord.

However, many commercial leases will include restrictions on the ability to assign. Thus, it is important that you review your lease in order to determine if assigning your lease is possible. Your lease will note all of the rights that you, as a commercial tenant, maintain over a property.

In general, most consumer protection laws that apply to residential leases do not apply to commercial leases. However, depending on your state laws, restrictions on assignment of commercial leases may be valid if such restrictions are deemed “reasonable.”

What Does It Mean to Sublet a Commercial Lease?

Should i hire a lawyer if i want to sublet or assign my lease.

A commercial sublease occurs when a company transfers a portion of their lease rights to a third party for a temporary period. As a company, you may either sublet a portion of your office space while you continue to work in the same space, or sublet the entire office location until the end of the lease or a period of time.

For example, suppose that a company is seasonal, such as a Halloween store. If they have signed a year-long fixed lease term, they may seek to sublet the property for the 8 months in which their store is not operational in order to generate income to pay rent.

It is important to note that when subletting, the original tenant (the “sublessor”) is still obligated to the landlord for the terms of the lease. This means that the sublessor maintains “privity of estate” and “ privity of contract ” with the landlord. The sublessee, or the person that utilizes the lease for a temporary period of time, is only liable to the original tenant for the lease, not the landlord.

To clarify, the original lease between the original commercial tenant and the landlord remains throughout the sublease period, and the original tenant is responsible for the new tenant. This means that the sublessee would go to the original tenant with any concerns regarding the rental property and pay rent directly to them. Subleases have become increasingly popular for big box retail stores who seek to lease corners of their facility to smaller retail stores. They are also popular for startups that do not have enough capital to lease an entire unit, and prefer to cut costs by sharing an office space with other companies.

For instance, in grocery stores or shopping centers you may see nail salons, ophthalmology services, cell phone repair shops, banks, or even food vendors that are subleasing from the main store.

Other reasons for subleasing or seeking out a sublease include:

• Lower Rates : Rates for commercial subleases, especially short-term ones, may be less than lease rates;
• Flat Rental Payment Structure : Commercial lease often has a flat rental payment structure with no unusual surprises;
• Fewer Obligations : In a commercial sublease, the sublessee usually has limited obligations to repair and maintain common areas;
• Better Bargaining Position : A sublease may put the sublessee in an advantageous position when it comes to negotiating a new lease with the landlord directly (i.e., when the main lease ends);
• Less Complex Lease : Commercial subleases are usually not as complex as commercial leases; or
• Additional Income : As noted above the most common reason for subleasing is to gain an additional source of rental income in order to make or lessen your lease payments.

As can be seen, there are numerous advantages for subletting or seeking out a sublease arrangement as a company. However, there are disadvantages for subletting your lease, such as being on the hook for any missed or late payments from your sublessor that may cause you to default on your lease with the landlord. Further, as noted above, as the sublessor, you are responsible for maintaining the location and providing repairs.

However, if in the lease the landlord has a duty to make repairs , then as the sublessor you will act as the intermediary to ensuring that the repairs are done timely, meaning that as a sublessee repairs may be delayed.

In sum, assigning or subletting your lease may be a great option for companies today. Assignment of a lease may be a better option for companies seeking to move away from their office location permanently; however, subletting may be a superior option for companies seeking to generate an additional source of income in their larger location.

As opposed to an assignment of a lease, which allows the original tenant to completely transfer their full lease interests to a third party, subletting a lease causes the original tenant to still be on the hook for repairs and payments from the third party to the landlord. As can be seen, commercial lease agreements can be very complex. Thus, it may be in your best interest to consult with an experienced and well qualified real estate lawyer to help you understand your options for assigning or subletting a lease. A licensed real estate attorney will be able to guide you through the process of assigning or subletting your lease and ensure that your interests are taken care of.

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Assignment vs. Sublease — What's the Difference?

Difference Between Assignment and Sublease

Table of contents, key differences, comparison chart, nature of transfer, legal relationship, consent required, financial liability, compare with definitions, common curiosities, what happens if a sublessee fails to pay rent, can a tenant sublease without the landlord's permission, are subleases shorter than the original lease term, can an assignment be reversed, can a landlord refuse an assignment, is it easier to obtain approval for a sublease or an assignment, what legal documents are needed for a sublease, what responsibilities does an assignee have, does an assignment release the original tenant from liability, how does an assignment affect the landlord, what is the main difference between an assignment and a sublease, is subleasing a good option for short-term housing needs, what are the benefits of subleasing, can the original tenant profit from a sublease, how does a sublease affect the original lease agreement, share your discovery.

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Assigning vs Subletting Your Commercial Lease in the UK

By Rachel King

Updated on 28 November 2022 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

Assigning Your Lease

Subletting your lease, which is most appropriate for your business, other options, key takeaways, frequently asked questions.

If you are leasing commercial business premises in England and Wales, you may consider ending your lease early. In that case, there are a few options available. One option is to check if your lease allows you to assign or sublet it to a new tenant or sublet it. This article will explain how lease assignments and sublets work, the difference between assigning and subletting and how to decide which is most appropriate for your business.

A lease assignment is where you find a new tenant to take over your lease and lease commitments.

To take advantage of this option, you will need to obtain your landlord’s consent. Importantly, you need their express consent to allow you to assign your original lease to someone else. Likewise, they need to consent to the new tenant you find as well. To ensure that you can easily get your landlord’s consent to the new tenant, ensure that you find a tenant who can abide by all the conditions of your original lease. 

Additionally, your landlord will want to see financial records to satisfy themselves that they will pay rent when due. Your landlord may also require references from previous landlords to ensure that they will look after the commercial premises. 

Further, your landlord may want you to enter into an Authorised Guarantee Agreement. This is a document where you guarantee your landlord that you will be liable for any lease breaches the new tenant makes. Whilst one of the benefits of a lease assignment is that the lease assignment releases you from your duties under the commercial lease, in effect, this document makes you responsible for those duties in a different way.

A sublet is different to a lease assignment. Here, your lease agreement with your landlord remains in place, so, legally, you are still the tenant of the property. Likewise, you are still responsible for all commitments contained in your lease . With this option, you find a subtenant to lease the commercial premises (or part of the commercial space you rent) and enter into a sublease with this tenant. 

Importantly, you will still need your landlord’s permission to sublet your original lease. However, since your landlord will not be involved in the sublease, they will not need to approve the subtenant. However, you must satisfy yourself that the subtenant you choose can agree to all the terms and conditions of your lease.

In a sublease, you are still responsible for paying rent on time and that you and your subtenant meet all other responsibilities under your lease agreement. You contract with your subtenant to pay rent and meet these obligations. Additionally, your landlord has no legal contract with your subtenant, just with you. Therefore, if your subtenant does not pay the rent due, your landlord can pursue you for this, and equally, you can pursue the subtenant.

Your commercial lease agreement may have express provisions regarding assigning or subletting your lease. For that reason, it is essential to read your lease and check what it says about these two options. If your lease does not give you permission for these options, you may not feel you have many choices. However, it is always worth talking to your landlord and explaining why you want to assign or sublet your lease.

Additionally, suppose you are not using the whole of the premises that you lease or only want to have a tenant for a short amount of time. In that case, a sublease is likely to be the better option for you. 

Alternatively, you may be looking to move to new premises permanently, or feel you no longer need business premises at all. Here, a lease assignment is likely to be the better option. If you are selling your business entirely, then it is common for the purchaser of your business to take your lease via a lease assignment.

Commercial tenants potentially have other options for ending their commercial leases early . For example, your lease may have a ‘break’ clause in it. A break clause provides a mechanism for you to end your lease early, often after a particular amount of time or within a specific period.  

Another option is to ask your landlord for permission to end your lease early. If you are in financial difficulties, your landlord may be willing to consider this option. Further, it may be better to allow you to leave the tenancy early than potentially have to collect unpaid rent later or the cost of eviction proceedings.

Assigning or subletting your commercial lease are two of the options for ending your commercial lease early. With an assignment of your lease, you will find a new tenant to take over your lease. With a sublet, you are still the tenant of your lease but enter into a new contract with the subtenant that you find. Additionally, with a sublease, you will still be liable for breaches of any of the lease terms in your commercial lease, so it is vital to ensure that the subtenant you choose will abide by these terms. Similarly, your landlord may require you to enter into an Authorised Guarantee Agreement when you assign a lease, which effectively makes you liable if the new tenant breaches the commercial lease terms. Whichever option you choose, make sure you do your homework on prospective new tenants or subtenants.

If you need help assigning your commercial lease, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our  membership page .

You need your landlord’s permission to sublet your lease, but they do not usually need to agree to a particular subtenant. However, you will need to satisfy yourself that the subtenant you choose is appropriate, as you will be liable for any breaches of your commercial lease.

Yes, you are still legally responsible for making sure that the rent is paid fully on time. Otherwise, you will breach your commercial lease, and your landlord can pursue you for this.

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