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 .

what does assignment mean in a lease

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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I’m planning on leasing land from a church. Putting a gym on the property. And leasing it back to the school.

what does assignment mean in a lease

Ok; first step is that you will need a leasing contract with the church. Ask them to prepare one for you so you would just need an attorney to review the agreement and that should cost less than if you had to be the party to pay a lawyer to draft it from scratch. You need to ensure that the purpose of the lease is clearly stated - that you plan to put a gym on the land so that there are no issues if the church leadership changes. Step 2 - you will need a lease agreement with the school that your leasing it do (hopefully one that is similar to the original one your received from the church). Again, please ensure that all the terms that you discuss and agree to are in the document; including length of time, price and how to resolve disputes if you have one. I hope this is helpful. If you would like me to assist you further, you can contact me on Contracts Counsel and we can discuss a fee for my services. Regards, Donya Ramsay (Gordon)

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Commercial Leases: Assignment vs. Sublet

(This may not be the same place you live)

  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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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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Assignment and Consent Standards in Commercial Leases

Mar 6, 2020

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Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. This article presents a brief overview of the assignment provision in commercial leases, both office and retail.

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. When a tenant’s interest in a lease is assigned, the tenant is transferring its entire leasehold interest and 100% of the leased premises to a third party for the entire remaining term of the lease. For the tenant, the assignment provision represents a potential exit strategy, dependent of course on the local market, and increased flexibility for future needs. For the landlord, the assignment offers greater security for its revenue stream and hopefully the avoidance of a tenant bankruptcy or default while keeping its building occupied. The tenant’s desire for flexibility and the landlord’s need for control is where the negotiations are focused. This article presents a brief overview of the assignment provision in commercial leases, both office and retail, with particular attention on the laws of Maryland, Virginia and the District of Columbia. The landlord’s standard for providing consent to a request to an assignment will be reviewed, and we will conclude by offering suggested language.

What If The Lease Does Not Contain An Assignment Provision?

The law traditionally favors the free alienation of property. Therefore, under the laws of almost every state, if the lease is silent on whether the landlord’s consent to an assignment is required, then the commercial tenant has the right to assign its interest. This is true in Maryland, Virginia and the District of Columbia. Given this baseline, almost every lease form will have a detailed provision setting forth the assignment process. Note also, however, that in most states it is also enforceable for a commercial lease to have an outright prohibition against assignments. Such a provision would likely be a non-starting deal point for most sophisticated tenants.

What Does Reasonable Mean?

If a lease simply provides that the tenant requires landlord’s consent to an assignment, but does not include the standard for giving or withholding that consent, then in many states the implied standard is that the landlord’s consent may not be unreasonably withheld. Historically this was the minority view, with the historical rule allowing the landlord to withhold consent for any reason. The implied duty of reasonableness is now more the norm as more states adopt this position when presented with the issue. There is express case law establishing this rule in Maryland, and most courts in Virginia and Washington, DC will imply such a covenant of good faith and fair dealing. Most states, though, do allow a landlord the sole right to grant or withhold its consent if the lease clearly expressly provides, and in Maryland the lease must specifically state that the landlord’s consent may be granted or withheld in the sole and absolute subjective discretion of the landlord. Again though, a sophisticated tenant with any leverage should never agree to such a provision.

Most negotiated leases will instead contain a provision requiring that landlord’s consent to an assignment is required, but such consent will not be unreasonably withheld. The tenant will likely also try to include landlord’s obligation to not unreasonably delay or condition its consent. A short clause without further defining what constitutes “reasonableness” generally favors the tenant, and landlords typically prefer including specific standards as to the criteria it can consider when reasonably deciding whether or not to consent to an assignment. Without such specificity, defining “reasonable” is difficult as the landlord and tenant clearly will have differing viewpoints and it may be left as a factual question to be decided in litigation. The typical definition (set forth in the Restatement (Second) of Property) would be that of a reasonably prudent person in the landlord’s position exercising reasonable commercial responsibility.

Absent a detailed provision listing the criteria a landlord can consider when reasonably reviewing a request to assign, a landlord is typically found to be considered reasonable if it considers certain general broad factors. First, the landlord reviews the assignee’s proposed use. In a retail setting, the landlord will be concerned whether the proposed use fits with the existing center and/or violates any existing exclusives or insurance requirements. In an office setting, the landlord might review the expected traffic and wear and tear on the building. Second, the landlord will consider the creditworthiness of the assignee. The landlord (and the assignor) will want to be confident that the assignee is capable of performing tenant’s obligations under the lease and a large creditworthy tenant increases the value of the asset. The assignor might argue that a strict financial test (such as a minimum net worth, for example) is unfair since the assignor is likely not being released upon the assignment and the landlord can still pursue the assignor in the event of a default. Third, the landlord will review the experience and history of the assignor. As mentioned above, landlords instead prefer a detailed list setting forth the many factors that they can include as part of reasonably reviewing a request for a lease assignment.

Without further establishing the criteria, the landlord puts itself at risk of a challenge by the tenant that a denial of a consent is unreasonable.

In defining “reasonable,” courts typically do not allow a landlord to deny or condition consent to an assignment based purely on economic reasons where the landlord results in substantially increasing what it was entitled to under the lease. In Washington, DC, there is well established case law holding that it is unreasonable for a landlord to withhold consent solely to extract an economic concession or improve its economic position. For example, a court would not consider it reasonable for a landlord to condition its consent on the assignee paying a greatly increased rent. Instead, as discussed below, landlords should look to protect their interests in a market of increasing rents by providing for either the sharing of excess rentals or a right to recapture.

What Are Typical Provisions In an Assignment Clause?

As discussed above, tenants generally prefer a short assignment provision simply requiring the landlord to not unreasonably withhold, condition or delay its consent to an assignment. But most leases are drafted by landlords, and over the years the assignment provisions have evolved to contain many typical provisions in addition to further defining “reasonableness,” including the following below.

  • Sharing of Excess Rents. Since many states do not permit a landlord to condition its consent on improving its economic position (e. g. , by increasing the rent), most leases instead contain a provision where the landlord is entitled to all or a portion of the profits. The profits may mean increased rent, or it may even be construed more broadly to consider the value of the location in a sale of the tenant’s business. The landlord’s argument is that it doesn’t want the tenants competing in the real estate market. The tenant should push back here, and certainly try to lower the percentage shared, carve out any consideration received in the sale of tenant’s business, and only share profits after all of the tenant’s reasonable costs incurred in connection with the assignment were first deducted.
  • Corporate Transfers. Since a purchase of the entity constituting tenant is likely not deemed an assignment under the law, most leases make clear that any such corporate sale, including the sale of either a controlling interest in the stock or substantially all of the assets of the tenant, is deemed an assignment for purposes of the lease. The tenant should carve out permitted transfers for typical mergers and acquisitions under certain conditions, and also carve out routine transfers of stock (or other ownership interests) between existing partners or for estate planning purposes. The landlord will likely accept a permitted transfer concept provided they receive adequate notice and the successor entity succeeds to all of the assets of the original tenant with an acceptable net worth.
  • Assignment Review Fee. Most landlords include in their form lease the requirement that the tenant reimburse them for legal and administrative expenses incurred in reviewing the request for consent and preparing the assignment. The tenant clearly wants to keep these fees reasonable and in keeping with the local market.
  • Recapture Rights. Landlords like to include the express right to recapture the premises in the event the tenant comes to it to request a consent for an assignment. A recapture clause allows the landlord to terminate the lease if market rents have increased or if it needs the space for another use. Sophisticated tenants should push back here as much as leverage allows, try to limit the time periods, and if nothing else try for the right to nullify the recapture by rescinding its request for the consent.
  • Tenant’s Remedy. To protect themselves from claims for damages from the tenant if the landlord withholds its consent to a requested assignment, landlords often include a provision where the tenant waives its rights to monetary damages in such a situation and can only seek injunctive relief. The tenant should try to delete this provision, or at least, if leverage permits, provide for the right to seek damages if the landlord is subsequently found to have acted in bad faith.

Assignment provisions are heavily negotiated and both the commercial landlord and tenant need to be advised to the applicable local law and know the market for a comparable transaction. ( Note: The author represents office and retail landlords and tenants throughout Virginia, Maryland and the District of Columbia.) Sample reasonableness provisions for both office and retail uses are copied below for reference.

Retail Lease

Landlord and Tenant agree, by way of example and without limitation, that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (i) In Landlord’s reasonable business judgment, the proposed assignee lacks sufficient business experience to operate a business of the type permitted under this Lease and to a quality required under this Lease; (ii) The present net worth of the proposed assignee is lower than that of Tenant’s as of either the date of the proposed assignment or the date of this Lease; (iii) The proposed assignment would require alterations to the Premises affecting the Building’s systems or structure; (iv) The proposed assignment would require modification to the terms of this Lease, or would breach any covenant of Landlord in any other lease, insurance policy, financing agreement or other agreement relating to the Shopping Center, including, without limitation, covenants respecting radius, location, use and/or exclusivity; (v) The proposed assignment would conflict with the primary use of any existing tenant in the Shopping Center or any recorded instrument to which the Shopping Center is bound; and/or (vi) The proposed assignment or subletting would result in a reduction in the Rent collected by Landlord during any portion of the term of this Lease.

Office Lease

Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building; (ii) The Transferee intends to use the Premises for purposes which are not permitted under this Lease; (iii) The Transferee is a governmental agency; (iv) The Transfer occurs prior to the first anniversary of the Lease Commencement Date; (v) The Transferee has a net worth of less than $10,000,000.00; (vi) The proposed Transfer would cause a violation or trigger a termination right of another lease for space in the Building; or (vii) Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, or (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice.

Reprinted with permission from the March edition of the Commercial Leasing Law & Strategy© 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected] .

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What is the Difference Between Subletting and Assigning a Lease?

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By Lianne Tan Lawyer

Updated on February 5, 2020 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 .

What Is a Lease Assignment?

What is subleasing, is assignment or sublease more appropriate, key takeaways.

As a tenant, you might find yourself in a situation where you need to get out of the lease. Here, you can choose to either:

  • assign the lease; or
  • sublet the premises.

Both assignment and subletting will require your landlord’s consent before you do so. While there are some similarities between both options, there are key differences between the subletting and assigning a lease. This article explains the crucial distinctions between assignment and subletting and outlines when each would be appropriate.  

Assigning a lease is the process of transferring all your obligations as a tenant under a lease to a new tenant. The new tenant will then be responsible for:

  • paying rent;
  • paying outgoings; and
  • any repair and maintenance obligations.

The party that you assign the lease to will become the tenant under the lease.

However, it is important to understand that an assignment does not release you from your legal responsibilities under the lease. This means that you are still responsible to the landlord if the new tenant breaches the lease. 

For example, if the new tenant does not pay their rent, you will be legally responsible for paying it.

 There are some exceptions to this, including:

  • where your lease includes a clause releasing you from all your obligations under the lease on an assignment; or
  • if you are a retail tenant and the relevant state or territory-based laws outline that you will no longer be legally responsible on an assignment.

If you wish to be released from your legal responsibilities after you assign your lease, you will need to negotiate this with your landlord.

Assigning a lease will often require that you meet a set process and conditions, including: 

  • obtaining your landlord’s consent; and
  • proving that the new tenant will be able to meet their obligations under the lease.

When finalised, all parties should sign a deed of assignment which formalises the arrangement. 

Subletting your premises allows a new tenant to take over either: 

  • part of your premises; or 
  • all of your premises.

Depending on how much of your premises you have sublet, the third party will also take over some of your legal obligations under the lease. 

For example, if you run a teaching centre at your premises, you might sublet a classroom to a tutoring business. The tutoring business will then pay part of your rent and may be responsible for maintaining the classroom that you have sublet out.

If you sublet your premises, you are still legally responsible under the lease. This means that if your subtenant does not meet their obligations under the lease, you will be responsible for  rectifying any breaches. 

For example, if your subtenant fails to pay their rent, you must still pay the full rent to the landlord. If you do not, you will be in breach of the lease. 

It is important to remember that if you sublet your premises, you effectively become the sublandlord under your sublease. Generally, a sublease will include and incorporate the terms of the original lease you signed with the landlord as well. In this case, you should take care to exclude certain obligations of your landlord, like to insure the building.

If you are subletting the premises to share the financial cost of the lease, you should pay attention to the timing of the subtenant’s obligations. This will ensure that the subtenant will pay you their portion of the rent before you are due to pay the landlord.

Like an assignment, subletting will require you to follow a certain procedure and meet certain conditions. You will also need to obtain the landlord’s consent before you proceed. To formalise the arrangement, both you and the subtenant must sign a sublease.

Whether an assignment or a sublease is more appropriate for you will depend on your intention for your business.  

A sublease may be more appropriate if you:

  • intend to downsize your business;
  • wish to share part of the costs under your lease; or
  • have additional space in the premises that you have no use for.

On the other hand, if you intend to sell your business or end your lease early, an assignment will be more appropriate.

While both assigning and subletting your premises allows you to pass on part or all of your premises to another party, they are two distinct types of dealings. An assignment passes on the whole of the property to a third party and may allow you to be released from legal responsibility. In comparison, a sublet allows you to offload part of your lease obligations to another party, while you still remain legally responsible under the lease. If you have any questions about assigning or subletting a lease, contact  LegalVision’s leasing lawyers  on 1300 544 755 or fill out the form on this page. 

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what does assignment mean in a lease

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

Find more Legal Forms and Templates

what does assignment mean in a lease

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: January 22, 2024 · 3min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

Person presenting documents to another person who is signing them

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

  • The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
  • The assignor must agree to assign their rights and duties under the contract to the assignee.
  • The assignee must agree to accept, or "assume," those contractual rights and duties.
  • The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

  • First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
  • All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
  • Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

  • Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
  • The effective date of the assignment and assumption agreement
  • Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
  • Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
  • Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
  • A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment: Definition in Finance, How It Works, and Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

what does assignment mean in a lease

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what does assignment mean in a lease

What Is an Assignment?

Assignment most often refers to one of two definitions in the financial world:

  • The transfer of an individual's rights or property to another person or business. This concept exists in a variety of business transactions and is often spelled out contractually.
  • In trading, assignment occurs when an option contract is exercised. The owner of the contract exercises the contract and assigns the option writer to an obligation to complete the requirements of the contract.

Key Takeaways

  • Assignment is a transfer of rights or property from one party to another.
  • Options assignments occur when option buyers exercise their rights to a position in a security.
  • Other examples of assignments can be found in wages, mortgages, and leases.

Uses For Assignments

Assignment refers to the transfer of some or all property rights and obligations associated with an asset, property, contract, or other asset of value. to another entity through a written agreement.

Assignment rights happen every day in many different situations. A payee, like a utility or a merchant, assigns the right to collect payment from a written check to a bank. A merchant can assign the funds from a line of credit to a manufacturing third party that makes a product that the merchant will eventually sell. A trademark owner can transfer, sell, or give another person interest in the trademark or logo. A homeowner who sells their house assigns the deed to the new buyer.

To be effective, an assignment must involve parties with legal capacity, consideration, consent, and legality of the object.

A wage assignment is a forced payment of an obligation by automatic withholding from an employee’s pay. Courts issue wage assignments for people late with child or spousal support, taxes, loans, or other obligations. Money is automatically subtracted from a worker's paycheck without consent if they have a history of nonpayment. For example, a person delinquent on $100 monthly loan payments has a wage assignment deducting the money from their paycheck and sent to the lender. Wage assignments are helpful in paying back long-term debts.

Another instance can be found in a mortgage assignment. This is where a mortgage deed gives a lender interest in a mortgaged property in return for payments received. Lenders often sell mortgages to third parties, such as other lenders. A mortgage assignment document clarifies the assignment of contract and instructs the borrower in making future mortgage payments, and potentially modifies the mortgage terms.

A final example involves a lease assignment. This benefits a relocating tenant wanting to end a lease early or a landlord looking for rent payments to pay creditors. Once the new tenant signs the lease, taking over responsibility for rent payments and other obligations, the previous tenant is released from those responsibilities. In a separate lease assignment, a landlord agrees to pay a creditor through an assignment of rent due under rental property leases. The agreement is used to pay a mortgage lender if the landlord defaults on the loan or files for bankruptcy . Any rental income would then be paid directly to the lender.

Options Assignment

Options can be assigned when a buyer decides to exercise their right to buy (or sell) stock at a particular strike price . The corresponding seller of the option is not determined when a buyer opens an option trade, but only at the time that an option holder decides to exercise their right to buy stock. So an option seller with open positions is matched with the exercising buyer via automated lottery. The randomly selected seller is then assigned to fulfill the buyer's rights. This is known as an option assignment.

Once assigned, the writer (seller) of the option will have the obligation to sell (if a call option ) or buy (if a put option ) the designated number of shares of stock at the agreed-upon price (the strike price). For instance, if the writer sold calls they would be obligated to sell the stock, and the process is often referred to as having the stock called away . For puts, the buyer of the option sells stock (puts stock shares) to the writer in the form of a short-sold position.

Suppose a trader owns 100 call options on company ABC's stock with a strike price of $10 per share. The stock is now trading at $30 and ABC is due to pay a dividend shortly. As a result, the trader exercises the options early and receives 10,000 shares of ABC paid at $10. At the same time, the other side of the long call (the short call) is assigned the contract and must deliver the shares to the long.

what does assignment mean in a lease

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What does 'DFA' mean in baseball? It's not an endearing abbreviation.

Albert Pujols . David Ortiz. Alex Rodriguez. Manny Ramirez. Nelson Cruz. Robinson Cano. Justin Upton.

Ortiz is enshrined in the Baseball Hall of Fame. Pujols is a lock for the Hall. Cruz is a future candidate for Cooperstown. And all were former major league All-Stars.

What do they all have in common?

Each of them have been DFA'd during their major league baseball career.

Ultimately, it means the player is cut from a team. It's one of several transactions that can happen to an MLB player. But it's a more common process for players who are in the latter years of their career and in the middle of a contract.

HOT STOVE UPDATES: MLB free agency: Ranking and tracking the top players available.

What does DFA mean in baseball?

Designated for assignment.

It's one of the more unique transaction types in baseball, where unlike being traded, the player is optioned to the minor leagues or simply cut from the roster.

What does being designated for assignment mean?

Teams are allowed to have 40 players on their roster, with 26 of them active on the major league roster. Over the course of the season, teams make roster moves, which sometimes involves cutting a player. In order to take someone off the 40-man roster, they must be designated for assignment.

MLB.com explains the process: "When a player's contract is designated for assignment — often abbreviated "DFA" — that player is immediately removed from his club's 40-man roster. Within seven days of the transaction (had been 10 days under the 2012-16 Collective Bargaining Agreement), the player can either be traded or placed on irrevocable outright waivers."

Can another team claim a DFA'd player?

Yes, any team can pick up a player off waivers. However, if that team claims the player, they would have to add the player to their 40-man roster.

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what does assignment mean in a lease

What does Quebec's new controversial housing law mean for tenants?

Video what does quebec's new controversial housing law mean for tenants.

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Bill 31 was pitched as a way to strike a balance between tenants and landlords, but advocates say the most significant impact will be the power it gives landlords to deny a lease transfer for any reason.

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COMMENTS

  1. Assignment of Lease: Definition & How They Work (2023)

    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

  2. Understanding How a Commercial Lease Assignment Works

    In basic terms, a lease assignment occurs when the current tenant to an existing lease agreement (known as the "assignor") assigns the lease rights and obligations to a third party (known as the "assignee").

  3. Assignment of Lease definition and explanation

    Definition of "Assignment of Lease" The Assignment of Lease is a title document (also referring to the process itself) whereby all rights that a lessee or tenant possesses over a property are transferred to another party. What is an Assignment of Leases:

  4. What Is Lease assignment?

    A lease assignment is a formal process where the original tenant of a rental property transfers all their rights and obligations under the lease agreement to a new tenant. This means that the new tenant steps into the shoes of the original tenant, taking on all the responsibilities and benefits that come with the leased premises.

  5. Navigating the assignment of a commercial lease

    As a tenant, one option is to assign the lease, which means removing yourself completely from the lease and transferring it to a third party. There are also instances when a landlord may need to assign a commercial lease, such as when a property is sold.

  6. Navigating the assignment of a residential lease

    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.

  7. Assignment of residential lease with landlord consent—How-to guide

    An assignment is the transfer of one party's entire interest in and obligations under a lease to another party. The new tenant takes on the lease responsibilities, including rent and property maintenance, and the original tenant is released from most (if not all) of its duties.

  8. Subleasing vs Assigning a Lease: What's the Difference

    Assignment of Lease When a tenant decides to assign a lease, he is essentially giving up all his rights and responsibilities to the rental agreement and the unit to a third-party assignee. As a result, the original tenant (the "assignor") will have to vacate the unit and allow the new tenant to take over all of the leased premises.

  9. What is a Lease Assignment?

    A lease assignment, often called a lease takeover or a lease transfer, is the legal term for when your landlord allows you to pass responsibility for your apartment to another tenant. The new tenant, your assignee, becomes the tenant under the lease agreement instead of you.

  10. Commercial Leases: Assignment vs. Sublet

    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.

  11. What Is an Assignment of Leases and How Can a Real Estate Lawyer Help?

    When all the rights of someone that is on a lease or a tenant of a residence are transferred to another person, an assignment of lease is accomplished. These are title documents as well as the process, and it is the rights of possession that are moved to the other individual.

  12. Sublease vs Assignment of Lease

    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.

  13. Assignment and Consent Standards in Commercial Leases

    Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. When a tenant's interest in a lease is assigned, the tenant is transferring its entire leasehold interest and 100% of the leased premises to a third party for the entire remaining term of the lease.

  14. Assignment Of A Lease: Everything You Need To Know!

    The assignment of a lease is a legal process that allows a tenant to transfer their lease to another party. This can be a complex process, but understanding the steps involved can help make it easier. Whether you are a landlord or a tenant, this guide will provide you with the information you need to navigate the assignment of a lease.

  15. What is a Lease Assignment?

    Simply put, it is a transfer of an existing lease (including all its rights and liabilities) by the current Tenant (known as 'the Assignor') to a new Tenant (known as 'the Assignee') with the consent of the Landlord. For example, if you sign a lease for 5 01780 [email protected] Menu Home Property Search About Us Blog Solution Partners

  16. What Is the Difference Between Subletting and Assigning Your Lease?

    The process for assigning or subletting your lease should be set out in your lease agreement. Unless otherwise stated, you will need the written consent of the landlord before you can assign or sublet your lease. In the case of an assignment, the landlord usually has the right to approve the new assignee.

  17. The Difference Between Subletting and Assigning a Lease

    What Is a Lease Assignment? Assigning a lease is the process of transferring all your obligations as a tenant under a lease to a new tenant. The new tenant will then be responsible for: paying rent; paying outgoings; and; any repair and maintenance obligations. The party that you assign the lease to will become the tenant under the lease.

  18. Understanding an assignment and assumption agreement

    An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

  19. Assignment: Definition in Finance, How It Works, and Examples

    Assignment: An assignment is the transfer of an individual's rights or property to another person or business. For example, when an option contract is assigned, an option writer has an obligation ...

  20. What does 'DFA' mean in baseball? It's not an endearing abbreviation

    What does being designated for assignment mean? Teams are allowed to have 40 players on their roster, with 26 of them active on the major league roster. Over the course of the season, teams make ...

  21. No more lease transfers? Quebec has passed a new housing law. Here's

    Lease transfers, by comparison, are generally lower and can come in below $1,000, often for apartments where leases have been passed from tenant to tenant for years, sometimes decades, keeping ...

  22. What does Quebec's new controversial housing law mean for tenants

    video What does Quebec's new controversial housing law mean for tenants?. 1 day ago; News; Duration 1:56; Bill 31 was pitched as a way to strike a balance between tenants and landlords, but ...