Assignment and Subleasing: Leasing Fundamentals

by Practical Law Real Estate

A Practice Note providing guidance on the fundamental issues in commercial leases related to assigning the lease or subleasing the premises. The assignment and subleasing clause is often one of the most heavily negotiated clauses in a commercial lease, impacting a landlord's control over the premises and a tenant's need for flexibility. This Practice Note examines the critical differences between an assignment and a sublease, including the legal effects on privity of contract and privity of estate. It explores the shift of legal risks for both transaction types and a tenant's potential ongoing liability. This Practice Note offers practical insights into negotiation considerations for both landlords and tenants, covering topics such as landlord consent requirements, recapture rights, and permitted transfers for corporate transactions like mergers or asset sales. It also outlines the due diligence process for landlords, tenants, assignees, and subtenants to help parties assess risks and navigate the procedural steps for entering into an assignment of lease or a sublease agreement.