assignment of lease or transfer of lease

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 .

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My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.

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Lease Assignment Agreement

Rating: 4.9 - 137 votes

A Lease Assignment Agreement is a short document that allows for the transfer of interest in a residential or commercial lease from one tenant to another. In other words, a Lease Assignment Agreement is used when the original tenant wants to get out of a lease and has someone lined up to take their place.

Within a Lease Assignment Agreement, there is not that much information included, except the basics: names and identifying information of the parties, assignment start date, name of landlord, etc. The reason these documents are not more robust is because the original lease is incorporated by reference , all the time. What this means is that all of the terms in the original lease are deemed to be included in the Lease Assignment Agreement.

A Lease Assignment Agreement is different than a Sublease Agreement because the entirety of the lease interest is being transferred in an assignment. With a sublease, the original tenant is still liable for everything, and the sublease may be made for less than the entire property interest. A Lease Assignment transfers the whole interest and puts the new tenant in place of the old one.

The one major thing to be aware of with a Lease Assignment Agreement is that in most situations, the lease will require a landlord's explicit consent for an assignment. The parties should, therefore, be sure the landlord agrees to an assignment before filling out this document.

How to use this document

This Lease Assignment Agreement will help set forth all the required facts and obligations for a valid lease assignment . This essentially means one party (called the Assignor ) will be transferring their rights and obligations as a tenant (including paying rent and living in the space) to another party (called the Assignee ).

In this document, basic information is listed , such as old and new tenant names, the landlord's name, the address of the property, the dates of the lease, and the date of the assignment.

Information about whether or not the Assignor will still be liable in case the Assignee doesn't fulfill the required obligations is also included.

Applicable law

Lease Agreements in the United States are generally subject to the laws of the individual state and therefore, so are Lease Assignment Agreements.

The Environmental Protection Agency governs the disclosure of lead-based paint warnings in all rentals in the States. If a lead-based paint disclosure has not been included in the lease, it must be included in the assignment. Distinct from that, however, required disclosures and lease terms will be based on the laws of the state, and sometimes county, where the property is located.

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A guide to help you: Tenants and Subtenants Obligations under a Sublease Agreement

Other names for the document:

Assignment Agreement for Commercial Lease, Assignment of Commercial Lease, Assignment of Lease, Assignment of Residential Lease, Assignment Agreement for Lease

Country: United States

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Transferring the lease when selling or buying a business.

Executive Summary Location, location, location. That’s a mantra that’s commonly heard when the discussion turns to home values. It’s also an important consideration when it comes to businesses. Don’t blow up your sales by giving short shrift to matters involving this key logistics. The lease is an integral part of the sale process. Dealing with the landlord or transferring the lease can be one of the two biggest deal killers when selling your business, the other being your financials. That’s why it pays –literally and figuratively — to handle the assignment or transfer of your lease properly. In this article, we show you how to do just that, from when to contact your landlord to what to expect with your security deposit in conjunction with a sale of your business — and a lot of stuff in between that you may not have considered just yet. A good time to get started is right now …

When should I contact my landlord and let them know I am selling my business?

The earlier, the better. Landlords respect business owners who are upfront and give them advance notice that they are selling. I see many sellers spring the news on the landlord three days before closing, only to have the landlord refuse the transfer of the lease. Contacting the landlord upfront will reduce this concern and will also ensure buyers that the landlord is cooperative and agrees with the game plan.

Doesn’t the landlord have to approve the transfer of the lease to the buyer?

No, not necessarily. Be sure to read your lease, as your lease should address this issue. The law in most states addresses assignments. Most state laws say that the landlord cannot “unreasonably withhold the assignment of the lease.” What does “unreasonably” mean? That’s the magic $25,000 question (or, depending on how expensive your attorneys are).

If landlords want to, they can put up a fight to keep you from transferring your lease. The reasons can vary. It certainly pays to make sure the landlord and you are on the same page before you invest a lot of time and effort in selling your business. It doesn’t pay to litigate this question. It is best to reach an agreement and move forward with both of you on the same page.

What is an “assignment” of the lease?

With an assignment, the lease is transferred to the buyer, and you remain on the lease as a guarantor. This can be bad or good, depending on your perspective.

• It is good if you are financing a portion of the sale price because this will enable you to take the business back if the buyer defaults.
• It can be bad because if the buyer defaults on the lease, you will likely be held liable.

The landlord’s viewpoint is that you initially signed your lease with a specific term, probably two to five years. If you sell the business, they will keep your name on the lease and add the buyer’s name to the lease. The landlord will typically keep you on as a “guarantor,” which means you are on the hook for the lease, but you have few rights left.

Why does the landlord do this?

Why not? Why would the landlord voluntarily agree to increase their risk without receiving anything in return?

What else are you going to do? You don’t have many other options, and the landlord has nothing to lose, so they nearly always request that you remain as a guarantor.

What is a sublease?

In a sublease, there are actually two leases.

• Lease 1 — landlord to you (master lease)
• Lease 2 — you to the buyer (sublease)

Most leases address this issue and do not allow it. Read your lease carefully. Look for a clause titled “Assignment and Sub-Letting.”

The main reason a sub-lease might be used would be when you are financing a portion of the sale price. Because you still have a lease with the landlord, you still have full privileges to access the property. This gives you more control until you are paid in full.

What is the craziest story you have heard involving the transfer of a lease?

In some leases, the lease reads that the landlord receives half of the sale proceeds when the business sells. Am I kidding? No. This is rare, but I have actually seen it happen. The clause should read that the landlord should get half of the “leasehold value” or half of the proceeds that are attributable to the value of the lease. However, the landlords I saw wanted half of the sale price of the business. The owner fought the case in court and eventually gave up after spending $30,000 in attorney fees.

Read your lease, or at least have an experienced advisor read it to make sure there aren’t any major issues in the lease. I have also seen many landlords who simply refused to assign a lease, and for no good reason (in my opinion).

Is there a fee to assign the lease?

Sometimes there is, usually from $500 to $1,000. This varies from state to state. The fee is reasonable as assigning the lease can involve some work on the landlord’s part, and they do not benefit from it monetarily.

What can I do to ensure that the landlord will assign the lease?

Approach the landlord early in the process and let them know of your intentions to sell your business. Ask what is important to the landlord in terms of a new tenant (experience, credit score, financial strength, etc.). When you find a buyer, position the buyer to meet the landlord’s needs. Help the buyer prepare a resume and financial statement, clean up their credit, and otherwise package themselves for the landlord.

How is the security deposit handled?

The landlord will typically keep your security deposit, and the buyer will reimburse you the money for the deposit. This prevents the landlord from returning your deposit and collecting a deposit from the buyer, which is two transactions.

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A Full Guide to Commercial Lease Assignment (Lease Transfer)

Dealing with a fixed-term lease agreement and looking to move offices or downsize? The topic of commercial lease transfer can be confusing to navigate, particularly when you are unsure of your rights and obligations under the lease.

If you’re renting a commercial property, you signed a contract at the beginning of your tenancy called a lease agreement , which contains all the details of your rights and obligations while occupying and conducting business operations at the commercial property. Your agent is required by law to give you a copy of the lease agreement if you don’t already have one.

The following article will serve as a full guide to commercial lease assignment, providing business owners with an overview of the legal considerations and elements required for an assignment of lease.

• 1 What is a Commercial Lease Assignment?
• 2 Current Market Conditions Boosting Lease Transfers and Flexible Arrangements
• 3 What is the Difference Between Commercial Lease Assignment and Subleasing?
• 4 Why Would You Want to Transfer a Lease?
• 5 How to Go About Transferring Your Commercial Lease
• 6.1 Goals and obligations of the original lessee and new tenant
• 6.2 Starting date of lease assignment
• 6.3 Pitfalls and consequences
• 7.0.1 Further Insights

What is a Commercial Lease Assignment?

Also known as a lease transfer, a commercial lease assignment involves a tenant transferring all of their interests and rights in a lease to a new party. This new tenant will take on the responsibilities of the existing lease, including rent and any other obligations, leaving the original tenant free to exit the agreement.

Commercial lease assignment often occurs when tenants want to leave their commercial property prior to the end of a fixed-term agreement. This often happens when a business quickly needs to upsize or downsize their space, move to a new city, or go out of business.

State law dictates whether tenants require their landlord’s consent prior to transferring a lease or subletting a part of their space. However, most lease agreements will clearly outline full transfer provisions prior to being signed and, whilst it is possible for lease assignment to be forbidden, the vast majority of agreements allow for transfers.

Current Market Conditions Boosting Lease Transfers and Flexible Arrangements

There has been a marked increase in the number of lease transfers and sublets of commercial properties in recent years, largely as a result of increased instances of remote work and downsizing seen across multiple industries. This reduced need for workspace has persisted, as many workers have continued to show a preference for remote and hybrid work arrangements if and when suitable.

Changing employee priorities have forced many businesses to reconsider their existing lease agreements, resulting in an increase in both commercial lease assignments and sublease agreements .

Landlords have adapted their offerings in the face of this changed market demand. Many are now offering flexible, month-to-month leases, allowing tenants to rest easy knowing that they won’t be stuck in a long-term lease agreement if their situation changes.

However, in the case of premium office spaces in highly sought-after locations or warehousing facilities close to major transport links, traditional leases are still very much the norm. In these cases, landlords may have realized that fully reconfiguring their offerings for flexible-usage is financially unrealistic. This may be due to a number of factors, including high-levels of existing demand for traditional leases, the saturation of the flexible workspace market, and the requirements of their typical target tenants.

So, if you’re leasing long-term commercial property and need out of the agreement, or at least to downsize, a lease transfer is a great solution that can leave all contracted parties satisfied. 

What is the Difference Between Commercial Lease Assignment and Subleasing?

A commercial sublease, which is a type of lease transfer, occurs when a tenant who currently leases property agrees to let another tenant use the space concurrently. The agreement involves all three parties: the original tenant, the new tenant, and the property owner.

When you sublease your space, you become the sub-lessor (or sub-landlord), and your new tenant is now the sublessee (or subtenant). Your agreement with them will normally allow them to reside in your space – or a specified portion of it – for either the remaining term of your lease or some other pre-determined length of time. 

It’s important to keep in mind that, as the original lessee, you’re still liable and responsible for making monthly lease payments on a sublet agreement. Therefore, you must collect rent from your subtenant each month while continuing to make rental payments directly to your landlord.

Why Would You Want to Transfer a Lease?

Lease transfers can be done to adjust the leased property size and monthly rent. A business owner may decide that they need to upsize or downsize their leased premises prior to the end of their original lease term.

Also, a lease transfer may be sought because the current tenant wants to vacate the rental property entirely, with no plans to lease elsewhere. This may be due to outside factors (e.g. a global pandemic) or the forced closure of a business.

A lease transfer, or a sublease arrangement, may also be desired so that two businesses with complementary strengths can share a workspace and mutually benefit from their operational proximity. No matter how complementary the proposed new tenant is to the existing tenant, this new business relationship will require the landlord’s permission (unless they have been given prior written consent providing them with sole discretion over subletting)

How to Go About Transferring Your Commercial Lease

The only necessary requirement for lease transfer is to identify a new lessee. In the vast majority of cases, your landlord cannot deny your request for a lease transfer unreasonably , yet it’s still in your best interest to find a new tenant with an established rental history and who can financially afford the rent on time. The only situation in which a commercial landlord can instantly deny a lease transfer request is if this provision was established in the initial lease agreement, however, this type of provision will often scare off prospective tenants.

If you’re looking to transfer your lease, most agents will request that the new tenant apply as if they were renting any other property as a primary lessee. Be sure that, in addition to their application , the prospective tenant provides documentation like company financials and past rental receipts to support your transfer request. This way, there’s no doubt of their ability to be a reliable tenant. 

If you wish to transfer your lease, you must have written consent from your landlord – mere verbal agreement will not suffice. Without your landlords’ express permission in writing, any attempted transfer of lease will be considered null and void. You will then need to fill out a lease assignment agreement, outlining the proposed assignee, current tenant, landlord, and existing lease term.

Important Things to Keep in Mind

To avoid any unnecessary stress or surprises, it helps to understand your rights and responsibilities before beginning the commercial lease transfer process.

Goals and obligations of the original lessee and new tenant

When considering a lease transfer, it is crucial to first identify the goal you hope to achieve through this deal. Most commercial leases have restrictions on transferring the lease, so before beginning any negotiations, all rights and obligations of the involved parties must be closely analyzed. If everyone’s interests are clear from the start, then agreement upon terms should run much more smoothly.

Starting date of lease assignment

In most cases , tenants need to pay their rent a month before move-in date. Confirm that the party being assigned the lease understands when they are responsible for making their first rent payment, so there are no delayed payments. This is also important for sublease agreements, because existing tenants are often liable for any missed rental payments made by the sublessee.

Pitfalls and consequences

Depending on the terms of the lease transfer and the legal documentation, the original lessee may find themselves responsible for any actions or defaults of the new leaseholder. 

As commercial leases often last several years, this could result in a heavy financial burden and significant legal consequences. Careful negotiation at the outset will always lead to a more positive outcome, so it’s important to tick all appropriate procedural and legal boxes when pursuing a commercial lease assignment.

Wrapping up

Before you begin subletting or transferring/assigning a lease, be sure that you understand the objectives of both parties and identify the correct method of altering the lease. Both lessors and lessees should also review all clauses in the lease and negotiate based on everyone’s incentives and interests. If there is any confusion about preparing or reviewing documents related to this process, it’s important to consult with legal advisors for the sake of all parties concerned.

Further Insights

Looking for more articles about the US office market and general office matters? You can find a number of recent posts below! Alternatively, if you’re a business or freelancer looking for flexible workspace in the US, we can help to connect you to a wide range of serviced offices and coworking spaces in highly sought-after locations such as New York City , Los Angeles , Houston , Atlanta , Miami , Chicago , and Dallas . You can also call us to have a discussion about your requirements on 972-913-2742 .

Miami Office Market Report | Q2-Q3 2022 Mid-2022 Las Vegas Office Market Report The Impact of Proptech on Commercial Real Estate 15 In-Person Employee Recognition Ideas for the New World of Work Mid-2022 Houston Commercial Real Estate Market Report Coworking Space for Students on U.S. College Campuses How the Decentralization of Cities Has Changed the U.S. Office Space Market US Office Market Trends 2022 – Statistics, Challenges and Outlook January 2022 – U.S. National Office Market Report The Great Resignation or the Great Retention? How Employers Yield the Power Heading into 2022 5 Ways to Create a Great Office Culture

Tags: 2022 , commercial lease assignment , commercial property , guides , landlords , lease transfer , Office Space , subleasing , tenants This entry was posted on Tuesday, November 8th, 2022 at 8:46 am and is filed under 2022 , Business Advice , Leases , Office Talk .

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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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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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Navigating the world of lease assignment agreements: what you need to know.

Are you planning to lease a property but need to transfer the lease to someone else? Or are you interested in taking over an existing lease for your business or personal use? If so, then understanding the world of Lease Assignment Agreements is crucial. A Lease Assignment Agreement allows for the transfer of a tenant’s rights and obligations under their existing lease agreement. However, navigating this process can be complex and overwhelming without proper information and guidance. In this blog post, we’ll provide you with everything you need to know about Lease Assignment Agreements – from what they are and their different types to their benefits and risks. So let’s dive in!

What is a lease assignment agreement?

A lease assignment agreement is a legal document that allows a tenant to transfer their lease rights and obligations to another party . This means that the new tenant takes over the existing lease, including any remaining time on it, and assumes all responsibilities outlined in the original agreement .

This type of agreement is commonly used when a tenant needs to move out before their lease expires or when someone wants to take over an existing lease for business purposes. The landlord must agree to this transfer by signing off on the Lease Assignment Agreement .

It’s important to note that a Lease Assignment Agreement differs from subletting because in subleasing, the original tenant still retains some control over the property while in an assignment, they give up all rights and responsibilities.

A Lease Assignment Agreement can be beneficial for both parties involved – as long as everything is clearly defined and agreed upon beforehand.

What are the different types of lease assignment agreements?

When it comes to lease assignment agreements , there are different types that you should be aware of. The most common ones include the following:

1. Absolute Assignment: This type of lease assignment agreement involves the transfer of all rights and interests in a leased property from one party (the assignor) to another (the assignee). The assignee takes over all obligations and responsibilities related to the lease .

2. Sublease Agreement: A sublease agreement is an arrangement where the original tenant sublets their space to a new tenant for a portion or entirety of the remaining term on their lease. In this case, both parties must agree with any changes made regarding rent, utilities, maintenance expenses etc.

3. Partial Assignment: This occurs when only part of the leased property’s rights and interest is transferred from one party to another. The partial assignment does not release the assignor from their obligation towards future liabilities under the original terms agreed upon in leasing contract .

4. Assumption Agreement: In this type of lease assignment agreement, one party agrees to take responsibility for fulfilling obligations owed by another party if they default on payment or other obligations specified in leasing contract .

Understanding these various types will help you make informed decisions about which option suits your needs best before signing any legal documents associated with Lease Assignment Agreements

What are the benefits of a lease assignment agreement?

A lease assignment agreement is a legal document that allows a tenant to transfer their leasehold interest in a property to another party. This type of agreement offers several benefits for both the tenant and the new assignee.

Firstly, for tenants looking to exit their lease early, an assignment agreement can help avoid hefty penalties or fees imposed by landlords for breaking a lease . By assigning their lease to another party, tenants can fulfill their contractual obligations while also finding someone else to take over their remaining rent payments .

On the other hand, assignees benefit from being able to acquire an existing lease without having to go through lengthy negotiations with landlords. Additionally, they may be able to secure more favorable terms than if they were starting from scratch on a new rental agreement .

For landlords, allowing assignments can reduce vacancy periods and ensure consistent cash flow as new tenants move in seamlessly when old ones leave. It also saves time and resources since there is no need for extensive screening of prospective tenants.

A well-executed lease assignment agreement presents numerous advantages for all parties involved in the transaction.

What are the risks of a lease assignment agreement?

Entering into a lease assignment agreement comes with its own set of risks that both the assignor and assignee should consider before signing on the dotted line . One of the biggest risks is liability for any outstanding rent payments or damages to the property.

If the original tenant fails to pay rent or causes damage to the property, then both parties could be held responsible under the terms of some lease assignment agreements. This means that even if you are not directly at fault, you could still end up facing legal action for unpaid rent or repairs.

Another potential risk is losing control over who occupies your leased space. In some cases, landlords may require approval before allowing a new tenant to assume a lease agreement . If this approval isn’t granted and you’ve already assigned your lease to someone else without permission, then both parties could face eviction as a result.

There’s always a risk involved in giving up your rights as an original tenant when you sign onto an assignment agreement. You’ll be relinquishing control over how long your business stays in one location and what happens once it moves out – which can impact everything from future expansion plans to overall financial stability.

How to prepare for a lease assignment agreement?

Preparing for a lease assignment agreement is an important step in ensuring a smooth and successful transfer of your lease rights to another party. Here are some steps you should take to prepare for the process:

1. Review your current lease agreement: Before entering into a lease assignment agreement, it’s essential to review your existing lease terms carefully. Ensure that you understand all clauses related to assignments, subletting or transfers.

2. Communicate with the landlord: Contacting your landlord early on can help avoid any misunderstandings later on during the process. You may need their approval before assigning the lease, so keep them informed throughout.

3. Identify potential assignees: Determine who you want to assign the lease too and ensure they meet all necessary requirements set out by both the landlord and existing lease agreement .

4. Negotiate terms with assignee: Once you’ve identified potential assignees, negotiate terms such as rent payments and security deposits if needed.

5. Draft an Assignment Agreement: Work with legal counsel or use online resources like templates from professional associations where possible, ensuring that all parties agree upon its contents before finalizing it.

Preparing well for a Lease Assignment Agreement can be complex depending on various factors involved but following these steps will help make it easier and more manageable !

How to execute a lease assignment agreement?

Executing a lease assignment agreement is the final step in transferring your lease to a new tenant. Before you sign on the dotted line, make sure you have all your ducks in a row.

Firstly, review the terms of your existing lease and ensure that they are clear and concise. This includes any clauses regarding subletting or assigning the lease. You should also check for any restrictions that may prevent you from assigning the lease without landlord approval.

Next, identify potential tenants who may be interested in taking over your lease. Once you’ve found someone suitable, it’s time to negotiate terms with them directly or through an attorney.

Once both parties agree on terms such as rent payments and security deposits, it’s time to draft up an assignment agreement document. This document should include details about both parties involved along with signatures from each party acknowledging their understanding of its contents.

Submit this executed agreement along with other necessary documents such as consent forms from landlords and financial statements to complete the transfer process smoothly.

To sum it up, a lease assignment agreement is an essential document that plays a crucial role in transferring the rights and obligations of the lessee to another party. As we have discussed in this article, there are different types of lease assignment agreements with benefits and risks involved.

To navigate the world of lease assignment agreements successfully, one must prepare adequately by reviewing the original lease agreement thoroughly and seeking legal advice if necessary. Proper execution of the agreement is also crucial to ensure that all parties understand their responsibilities.

Understanding how a lease assignment agreement works can help you make informed decisions when dealing with leases. Whether you’re a landlord or tenant looking to transfer your interests in a property, always remember to be cautious and seek professional guidance throughout the process.

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This commercial lease assignment is between , an individual a(n) (the " Original Tenant ") and , an individual a(n) (the " New Tenant ").

On or about , the Original Tenant and (the " Landlord ") entered into a lease agreement (the " Lease ").

The Lease covers the commercial property located at ,    , and more particularly described as follows: (the " Premises "). The Premises contains feet of interior floor space.

Under section of the Lease, the Original Tenant is permitted to assign its interest in the Lease, with the consent of the Landlord.

The Original Tenant wishes to assign to the New Tenant its rights in, and delegate all of its obligations under, the Lease, and the New Tenant wishes to accept this assignment.

The parties therefore agree as follows:

1. ASSIGNMENT.

The Original Tenant assigns to the New Tenant of all its rights in, and delegates to the New Tenant all of its obligations under, the Lease. This transfer will become effective as of (the " Effective Date "), and will continue until the present term of the Lease ends.

2. ASSUMPTION OF RIGHTS AND DUTIES.

After the Effective Date, the New Tenant shall assume all rights and duties under the Lease, including the obligation to pay rent under the Lease when it is due. The Original Tenant will have no further obligations under the Lease The Original Tenant will remain bound to the Landlord under the Lease, notwithstanding the assignment . However, the Original Tenant remains responsible for obligations accruing before the Effective Date.

3. REIMBURSEMENT.

On or before the Effective Date, the New Tenant shall pay $ to the Original Tenant, which is the sum of:

• (a)  The security deposit held by the Landlord under the Lease; and
• (b)  The rent or other deposits paid in advance by the Original Tenant for any period after the effective date of this assignment.

4. INDEMNIFICATION.

• (a)  The Original Tenant shall indemnify the New Tenant against any award, charge, claim, compensatory damages, cost, damages, exemplary damages, diminution in value, expense, fee, fine, interest, judgment, liability, settlement payment, penalty, or other loss (a " Loss ") or any attorney's or other professional's fee and disbursement, court filing fee, court cost, arbitration fee, arbitration cost, witness fee, and each other fee and cost of investigating and defending or asserting a claim for indemnification (a " Litigation Expense ") arising out of the Original Tenant's breach of its obligations under the Lease before the Effective Date.
• (b) The New Tenant shall indemnify the Original Tenant against all Losses or Litigation Expenses relating to the Lease, except if those Losses or Litigation Expenses arise from the Original Tenant's failure to perform its obligations under the Lease before the Effective Date.
• (c)  The New Tenant shall indemnify the Original Tenant against all Losses or Litigation Expenses attributable to the acts or omissions of the New Tenant or its agents, contractors, or employees with respect to the Premises or any activities on the Premises. This indemnification will survive the termination of the Lease and this assignment.

5. CONTINUING EFFECTIVENESS OF LEASE.

This assignment is made on the understanding that all other terms of the Lease remain in full effect, including the prohibition against further assignments and subleases without the Landlord's express written consent.

6. ORIGINAL TENANT'S REPRESENTATIONS.

The Original Tenant represents that it:

• (a) has the power and authority to enter into and carry out this assignment;
• (b)  has not previously assigned its rights under the Lease;
• (c)  is the lawful and sole owner of the interests assigned under this assignment;
• (d)  the interests assigned under this assignment are free from all encumbrances;
• (e)  except for the Landlord and the Original Tenant, there are no parties in possession or occupancy of the Premises or any part of them, and there are no parties with possessory rights on the Premises or any part of them; and
• (f)  has performed all obligations and made all required payments under the Lease.

7. CONDITION OF PREMISES.

The New Tenant has examined and inspected the Premises and accepts them "as is" and in their present condition with all faults. Except as provided in this assignment, the Original Tenant makes no representations, covenants, or guaranties about the status, nature, or condition of the Lease or the Premises.

8. INTERPRETATION.

In interpreting the language of this assignment, the parties shall be treated as having drafted this assignment after meaningful negotiations. The language in this assignment will be construed as to its fair meaning and not strictly for or against either party.

9. GOVERNING LAW.

• (a) Choice of Law.  The laws of the state of govern this assignment (without giving effect to its conflicts of law principles).
• (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in , .

10. AMENDMENTS .

No amendment to this assignment will be effective unless it is in writing and signed by a party or its authorized representative.

11. COUNTERPARTS; ELECTRONIC SIGNATURES.

• (a) Counterparts.  The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
• (b) Electronic Signatures.  This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

12. SEVERABILITY.

If any one or more of the provisions contained in this assignment is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this assignment, but this assignment will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this assignment to be unreasonable.

13. NOTICES.

• (a) Writing; Permitted Delivery Methods.  Each party giving or making any notice, request, demand, or other communication required or permitted by this assignment shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this assignment: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
• (b) Addresses. A party shall address notices under this section to a party at the following addresses:
• If to the Original Tenant:
• If to the New Tenant:
• (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

14. WAIVER.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this assignment will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

15. ENTIRE AGREEMENT.

This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.

16. HEADINGS.

The descriptive headings of the sections and subsections of this assignment are for convenience only, and do not affect this agreement's construction or interpretation.

17. EFFECTIVENESS.

This assignment will become effective when all parties have signed it.The date this assignment is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this assignment.

18. NECESSARY ACTS; FURTHER ASSURANCES.

Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this assignment contemplates or to evidence or carry out the intent and purposes of this assignment.

[SIGNATURE PAGE FOLLOWS]

Each party is signing this agreement on the date stated opposite that party's signature.

[PAGE BREAK HERE]

LANDLORD'S CONSENT  AND RELEASE

As Landlord under the Lease, I hereby consent to this assignment of the Lease, and to the New Tenant's assumption of the Original Tenant's obligations under the Lease, including the obligation to pay rent when it is due. As of the Effective Date, I release the Original Tenant from all liability for obligations (including rent payments) under the Lease However, the Original Tenant remains primarily obligated as tenant under the Lease and I do not waive or relinquish any rights under the Lease against either the Original Tenant or the New Tenant.

EXHIBIT A Attach copy of Lease

Free Assignment of Commercial Lease Template

Transfer your commercial lease to a new tenant smoothly. create an assignment of a commercial lease to clearly articulate the new tenant's rights, responsibilities, and obligations..

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How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Assignment of commercial lease: How-to guide

Occasionally, tenants wish to leave a rental property before the end of their lease. Individuals may take new jobs in new cities, and companies may go out of business or sell their enterprises to a third party. 

Whatever the reason, tenants can transfer their original commercial lease to new parties by completing an assignment of the lease.

An assignment transfers one party's interest and obligations under a lease to another party. 

During these tenant transfers, the new tenant takes on the lease responsibilities, including paying rent and property maintenance of the leased premises, and the original tenant is released from most of their duties.

Successful property management begins with good documentation and a properly drafted, executed assignment: 

Ensures that all parties involved understand the obligations being transferred 

Defines the responsibilities that each party will have under the new arrangement 

Lays the foundation for a long-lasting landlord and new tenant relationship 

Important aspects to consider when drafting commercial leases

Laws about the original commercial lease agreement.

State laws governing real estate, renting, leasing, and assignments vary widely and can tremendously affect your arrangement. 

Since the tenant is legally responsible for this document, they must include specific information like financial statements in the commercial lease assignment. Consider your state and local laws for additional information required in your area.

Criteria for commercial landlords in providing consents

A landlord may consider only proper factors when deciding whether or not to consent to an assignment. 

Some criteria will be regarded as impermissible by courts, such as refusal based on race or sex of the proposed new tenant. If your landlord does not consent to your attempted assignment, ensure they give you clear written reasons for the decision. Failure to provide such reasons can itself be deemed unreasonable.

Consequences of not providing consent 

It is essential to seek the landlord’s permission for the proposed transfer of the duties. 

Depending on your jurisdiction or the terms of your original lease, a landlord’s failure to respond to your request for consent to assignment within a specific time may be deemed consent. Sometimes, it may give the assigning tenant grounds to terminate the lease. Review the original lease and your state’s laws for additional details.

Although a landlord is not required to consent to a lease assignment agreement, in some cases, your lease will state that a landlord’s consent will not be “unreasonably” withheld. This is more common in commercial leases than in a residential lease. What is considered unreasonable varies from jurisdiction to jurisdiction, and you should review the laws in your area (and the assignment clause in your original lease agreement) for additional information. On the other hand, if the lease states that the landlord may use their “sole discretion” to evaluate the new tenant, they can veto this assignment without any reason.

Rights of the original tenant

The original tenant cannot assign more rights than the original lease. For example, if the lease term is one year, the assignment term cannot be two years.

Review the lease assignments before signing

Most leases require the landlord’s written consent before an assignment becomes effective. Review the assignment provisions and the original lease agreement for additional information and see if other requirements must be met to make the lease assignment agreement valid.

Get the assignment signed

Sign three copies of the assignment, one for you, the other party, and the landlord. Depending on the nature of its terms, you may decide to have the document witnessed or notarized. This will limit later challenges to the validity of a party’s signature. 

Be sure the assignee gets a copy of the original lease by attaching it to the assignment. Its terms will bind them, and they should know their new obligations and rights.

If your agreement is complicated, contact an attorney to help draft a document that meets your needs. 

Key components of a commercial lease assignment 

The following instructions will help you understand the terms of your assignment. 

Introduction 

In this section, identify the parties and, if applicable, what type of organization(s) they are. Write down how the document identifies each party. For example, the current tenant can be addressed as the “original tenant” or “assignor” as they assign the lease to the new tenant, and the new tenant can be called the “new tenant” or “assignee.”

Furthermore, add the date on which the assignment will become effective – when it is signed. 

The “whereas” clauses, referred to as recitals, define the world of the agreement and offer essential background information about the parties. 

In this assignment, the recitals include a simple statement of the parties’ intent to assign the original tenant’s interest in the lease and the new tenant’s intent to assume it. Provide a brief description of the rented property and the landlord’s name under the lease.

You don't need to include a complete legal description for the property description, but provide enough information to identify it. For individual houses, the address will usually be sufficient. If the property has a specific name (e.g., “Lincoln Towers”), include that as well. If only a section of the premises is assigned, clarify that in this description. 

This section mentions the assignor’s assignment of their right and interest in the lease to the assignee. This assignment clause allows you to determine whether all of the assignor’s interest in the lease is being assigned or only part of it. For example, if interest in only one-half of the premises is being assigned, the document should note this. 

Assumption of rights and duties

This section clarifies the assignor’s responsibilities for the duties listed under the lease (e.g., rent, maintenance of property, etc.). For example, whether:

The assignor is ultimately released from any liability they had under the lease. For example, if the assignee defaults, the landlord cannot seek payment from the assignor.

The assignor will be liable to the landlord if the assignee defaults. 

In any event, the assignor will remain responsible for any obligations that occurred before the assignment. In other words, if the damage happened to the apartment before the transfer or the assignor did not fulfill another obligation under the lease, the assignor remains responsible for the building occupied.

Reimbursement

In many rental relationships, amounts are paid in advance or deposited as security for the landlord. 

At the end of the lease, this security deposit (with deductions subtracted or interest added) is returned to the tenant. If an entire interest is assigned, the lease does not end, and the assigning party cannot get this money back. This paragraph requires the assignee to pay those amounts to the assignor, and any later return of that money by the landlord will be made to the assignee.

Indemnification

In such clauses, the assignee promises to bear the financial cost of any injury the assignor suffers due to its assignment and any lawsuits arising from its activities on the premises. Note that there is an exception for things done by the assignor before the effective date of the assignment — the assignor remains responsible for those actions.

Continuing effectiveness of lease 

Here, emphasize that the original lease terms are still effective to the assignee, except for the assignment.

Assignor’s representations and warranties 

List the assignor’s promises under the assignment. Note that this is not a detailed list of services to be provided. Instead, this is the assignor’s assurance that the lease and the rental interest it’s providing are helpful (i.e., no one else lives or has an interest in the place, the lease is still in effect, the assignor is not behind in rental payments, etc.). If there are additional representations the assignor should be making, feel free to include those here.

Condition of premises

Here, mention that the premises are not warranted to be perfect or valuable in a particular way. Instead, the assignee is taking the rented property for what it is and is accepting it in that state.

Additional terms of assignment

This optional provision allows the assignor and the assignee to include any representations, warranties, or other provisions particular to their situation. 

Interpretation

This section provides information that both parties were on equal footing in negotiating the consent to assignment. In many cases, a contract is interpreted favorably by the individual who did not draft it. This clause clarifies that both parties were involved in the drafting, so the document should not be read in favor of (or against) either.

Here, list the addresses to which all official or legal correspondence should be delivered. This can be the tenant’s business address or the mailing address for both the assignor and the assignee. 

Modification

This section indicates that any changes to the document are only effective if they are made in writing and signed by both parties.

Governing law

This section allows the parties to choose the state laws used to interpret the document. 

Counterparts; electronic signatures

This section explains that even if the parties sign the assignment in different locations or use electronic devices to transmit signatures (e.g., fax machines or computers), the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city—much less the same room — this provision ensures that business can be transacted efficiently without sacrificing the validity of the agreement as a whole.

Entire agreement

This clause mentions that the document parties are signing is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a party from arguing that other enforceable promises exist, but it can provide you some protection from these claims.

Landlord’s consent and release 

Review the terms of the original lease agreement to determine whether or not the landlord’s consent is required to make the assignment effective. This is usually the case. If so, have the landlord sign the document. 

Frequently asked questions

What is the purpose of an assignment of lease.

Whether it's because it's time to move to a new space or city, business isn't booming, a company gets sold, or otherwise, sometimes commercial tenants must leave a lease before it ends. And sometimes, they may want to transfer the responsibilities of their lease to someone new. A lease assignment occurs in this case.

Here's the information you'll need to have handy to complete your assignment of commercial lease:

Who the old tenant is : Have their name and contact information ready

Who the new tenant is : Have their information available

What is the difference between an assignment and a sublease?

An assignment transfers one party's interest in an agreement to a third party. In this case, the original tenant gives all their interest to a new tenant. That new tenant steps into the shoes of the old tenant and the old tenant is released from most of their obligations under the lease (although this can be changed by agreement). 

This is not the same as a sublease. Under a sublease , a third party is granted only those specific rights provided in the sublease. The original tenant remains ultimately liable for residual obligations under the lease or any failures of the new tenant to meet their obligations. This means that the original tenant will be responsible (in equal measure with the new tenant) for any skipped rent payments or damage to the property.

Related templates

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How Do You Assign or Transfer a Commercial Lease?

By Jessica Dinh Lawyer

Updated on December 15, 2023 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 .

• 1. Seek Your Landlord’s Consent 

2. Deed of Assignment

3. transferring a retail lease, key takeaways.

If you lease a commercial property to operate your business, there may be situations where you need to transfer the lease. There are usually two situations when a tenant will transfer (also known as an assignment ) a commercial lease to another party (the assignee) before the end of a lease term. Namely, where the tenant is:

• selling their business, and the purchaser agrees to accept the existing lease rather than enter into a new lease with the landlord; or
• is proposing to exit the lease and has found a party who will take on the existing lease.

This article explains how the transfer of a commercial lease works. It also explains the critical terms of the deed of assignment from the perspective of the landlord, tenant and assignee.

1. Seek Your Landlord’s Consent 

As soon as you propose an assignment as a tenant, you should:

• review the existing lease to identify if the lease can be assigned;
• identify the requirements of landlord’s consent upon assignment; and
• correspond with the landlord or agent as to consent and approval of the proposed assignee under the lease. 

When seeking your landlord’s consent for the assignment, the proposed new tenant must usually provide their financial and business references to the landlord.

Can a Landlord Refuse to Assign a Retail Lease? 

If the lease is a retail lease, the landlord will not be able to withhold consent to an assignment unreasonably. The retail legislation (different in each state) provides the grounds on which the landlord can withhold their consent. These generally include the:

• assignee proposes to change the permitted use;
• assignee has financial resources or retailing skills that are inferior to the assignor, and
• assignor has not complied with the relevant steps, per the retail legislation in that particular state, including providing a disclosure statement.

Ensure that you check the retail legislation in that particular state when carrying out an assignment.

After obtaining the landlord’s consent, a deed of consent to assignment is prepared (deed of consent).

A deed of consent is a legal document that outlines that the:

• landlord confirms their consent to the transfer of lease;
• tenant agrees to transfer their entire interest in the lease to the assignee from a specific date (the assignment date); and
• assignee, or new tenant, agrees to assume the rights and obligations of the lease as if they were the original tenant (such as repairs, security and payment of rent and outgoings) from the assignment date. This will continue until the end of the lease term and during any option or renewal terms.

The Landlord

Generally, the landlord’s key concern is that the transfer does not affect their rights under the lease. The landlord can address this concern by ensuring that the original tenant (assignor) has complied with all of their obligations under the lease until the assignment date. The landlord will have the right to take action against the tenant after the assignment date for any existing breach of the lease. 

Additionally, the landlord will want to make sure that the assignee can comply with the lease obligations. This will often involve an assessment of the assignee as a tenant. The landlord will thoroughly examine the information before confirming their consent to the transfer. This might include: 

• financial statements; 
• business history; and 
• professional references. 

Finally, there is usually an agreement about who is liable for the costs of the deed of assignment. The landlord’s lawyer usually prepares the agreement. However, the outgoing tenant or the incoming tenant pays these costs, not the landlord.

The deed of assignment usually requires the assignee to give the relevant security and guarantees.

The Outgoing Tenant

As the outgoing tenant, your key concern is to be released from your obligations under the lease from the assignment date. The deed of assignment can address this concern by specifying that:

• the tenant is released from any claims or liabilities under the lease from the assignment date (provided that there is not an existing breach of the lease); and
• if the tenant has provided any security, it is to be returned or refunded.

It is important for you to remember that you are bound to the terms of the lease until the transfer of the commercial lease is formalised through the deed of assignment. Accordingly, you should continue to comply with your obligations under the lease until the assignment date.

On that note, a landlord might not agree to release you entirely from your obligations if the retail legislation in your state does not prevent this. This means that if the new tenant defaults, you could be responsible for fulfilling the lease obligations. In that case, you would need guarantees or an indemnity from the new tenant.

If the transfer of deed has to be registered, typically with retail leases, you (the assignor) usually organise the registration of the transfer, whose costs are divided with the new tenant  (the assignee).

The Assignee

The new tenant’s, or the assignee’s, key concern is for the landlord to accept the transfer of the commercial lease from the assignment date. The deed of assignment can address this concern by providing that:

• the landlord accepts the assignee as tenant from the assignment date;
• the landlord will observe their obligations specified in the lease in favour of the assignee; and
• if required in the relevant state, the parties sign a transfer of lease form and register the transfer at the land titles office.

The assignee should ensure that they have reviewed the contents of the commercial lease (including the disclosure statement if it is a retail lease). Then, they must review the lease before signing the deed of assignment. This is because the assignee will need to comply with the obligations of the tenant from the assignment date. These obligations may include the provision of security and a personal guarantee.

A personal guarantee is taken on by an individual to guarantee the obligations of another individual or entity. For example, the assignee providing may provide a personal guarantee where a particular party becomes a guarantor. If you cannot meet your obligations (such as to pay the lease), then the guarantor will have to meet that obligation themselves.

Before finalising the deed of assignment, it is important that the landlord, assignor and assignee agree on who bears the costs of preparing, negotiating and registering the deed of assignment. Generally, you, as the assignee, will bear the costs. However, you may choose to add a cap or exclude negotiation costs. 

If the lease you are transferring is a retail lease, the tenant will typically need to give the assignee a disclosure statement. This statement also includes details of any changes to the disclosure statement that the landlord provided when the lease was first entered into.

The disclosure statement outlines the vital information that the assignee needs to know, including the:

• current annual rent under the lease;
• current estimated outgoings payable under the lease;
• term of the lease and any options to renew; and
• details of the premises. 

Generally, the tenant may request an updated disclosure statement from the landlord before the transfer of the commercial lease. The landlord has an obligation to provide the updated disclosure statement, usually within 14 days from the date of the request.

The disclosure statement requirements differ between the states and territories. For example, in:

• New South Wales, the assignee must receive the disclosure statement at least seven days before the date of the transfer; and
• Victoria and Queensland, the assignee must receive the disclosure statement at least seven days before the assignor requests the landlord’s consent.

The consequences of failing to provide a disclosure statement also differ between the states and territories. For example, the assignee may:

• withhold payment of rent;
• seek compensation from the landlord; or
• terminate the lease within a specific timeframe.

It is essential for all parties to be aware of the requirements and consequences of the disclosure statement provisions in their particular state or territory.

Additionally, transferring a lease may also lead to stamp duty implications . Stamp duty is a tax imposed on the purchase of assets and transactions of property. Therefore, if you are transferring a lease, you will commonly have to pay stamp duty. It is important that you are aware of the circumstances where you, as a tenant, will be required to pay stamp duty.

A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.

Whether you are a landlord, tenant or assignee, it is crucial that you understand your rights and obligations when transferring a commercial lease. Further, the transfer of a retail lease leads to additional requirements and consequences related to the disclosure statement. Finally, you need to be aware of the steps you should take to ensure a smooth assignment.

If you need assistance with drafting or reviewing the terms of a deed of assignment, 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 1300 544 755 or visit our membership page .

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How Will the Changes to the Retail Leases Act 1994 (NSW) Affect My Business?

I’m Selling a Business. How Do I Transfer the Lease?

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Tenancy (high-rise/landed)

Transferring your tenancy.

Transfer of tenancy is only permitted in instances of corporate restructuring.

Examples of corporate restructuring:

• Converting your business from one type of legal entity to another. Legal entities include Sole Proprietorships, Partnerships, Private Limited Companies and Limited Liability Partnerships
• Transferring your business to a wholly-owned subsidiary, sister company, parent company or related company within the same group
• Transferring your business to a joint venture company where you own more than 50% shareholdings
• Transferring your business to existing shareholders who hold more than 50% of your company’s shares
• Changing the owner of your Sole Proprietorship*
• Adding a partner(s) to your Sole Proprietorship*^
• Adding or removing a partner(s) from your Partnership*^
• Converting your Sole Proprietorship to a Partnership, or vice versa*^

*Please provide a marriage certificate(s) or a birth certificate(s) if the transfer involves a family member(s).

^Where the original set of shareholders hold more than 50% of the business’ shares.

When you transfer your tenancy, you will hand over the remaining period of your tenancy to a new tenant.

The new tenant will pay the same rent and must continue the same usage of the space (i.e. no change of use  for the remaining tenancy term).

Applying for transfer of tenancy

Fill out this application form for a transfer of tenancy .

Do note that you must submit the new tenant’s most updated business profile from Accounting and Corporate Regulatory Authority (ACRA) as part of the application.

You will be notified via email if additional documents are required.

We will inform you of the outcome of your application within 14 working days of your submission.

Lease (landed)

Transferring your lease.

When you transfer your lease, you will hand over the remaining period of your lease to a prospective buyer.

Transfer of lease is only permitted in instances of:

• An outright sale of your premises to a prospective buyer
• Sale and Leaseback (S&LB) Scheme, where your lease is transferred to a third-party facility provider. Find out more here .

Things to note before applying for transfer of lease:

Assignment prohibition period.

Assignment Prohibition Period (APP) is the minimum period you are required to hold the lease. You are not permitted to transfer your lease during this period. You are also not allowed to transfer your lease if you have less than 5 years remaining in your lease period. Please check your lease agreement for the APP that applies to your premises.

Right of First Refusal 

If there is a Right of First Refusal (ROFR) in your lease agreement, we reserve the first right to buy over the remaining period of your lease.

Solar Deployment 

JTC lessees are required to inform the incoming lessee of the solar deployment that the outgoing JTC lessee had undertaken. If there is no existing solar deployment, the incoming lessee will be required to undertake Mandatory Solar Deployment provided the site has:

• 800 sqm of available contiguous rooftop area; and 
• 15 years of remaining lease term or more 

Applying for transfer of lease

To ensure that the transferee puts the scarce land to productive use, application for the transfer of lease is subject to JTC’s assessment of the transferee’s business plan, which will be evaluated on the value-add to the Singapore economy and the creation of good jobs. Log in to the customer service portal to apply for transfer of lease.

To encourage the use of digital services, the application processing fee of $599.50 or $1,199 (inclusive GST) is temporarily waived for applications submitted through our online portals.

Note that you must submit the following on behalf of the transferee:

• The transferee’s business plan, which should include details on Fixed Assets Investments (FAI) such as plant & machinery, creation of good quality jobs and value-add to the economy
• Advisory for Industrial Allocation from the National Environment Agency (NEA) Development Control and Licensing Department (DCLD), for the transferee’s usage
• Land Use Proposal Form from Land Transport Authority (LTA), if the transferee’s usage includes warehousing
• Approval for storage of petroleum and flammable material from Singapore Civil Defence Force (SCDF), if the transferee’s usage involves such material and exceeds allowed quantities

We will inform you of the outcome of your application through email within 14 working days of your application submission.

After your application is approved

If you or the transferee conducts business activities that involve pollutive materials, an Environmental Baseline Study may need to be conducted. Find out more here .

After you receive our approval, do note you must rectify any breaches before the transfer of lease can be legally completed.

If you are on a land rental payment scheme , the transferee’s rent will be revised to the prevailing posted rate after the transfer of lease, unless you are transferring your lease due to corporate restructuring.

If you are on a land premium payment scheme , an assignment levy may apply. If applicable, the levy amount will be indicated when you receive the outcome of your application.

Notify us of transfer completion date

When the transfer of lease is legally completed, your solicitor must immediately notify us of the transfer completion date through email.

The transferee will start paying rental from the first day of the month after the transfer of lease is legally completed.

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Transferring a rental agreement (lease)

If a renter wants to move out of a rental property and they have found someone to take over their rental agreement, they can ask the rental provider to transfer (or assign) it to the new renter. This used to be called transferring a lease.

There are rules about transferring a rental agreement for both renters (tenants) and rental providers (landlords).

Residents in rooming houses cannot transfer their residency rights. For information on ending a rooming house residency, view rooming house resident giving notice .

How to transfer a rental agreement

The renter must ask the rental provider for consent before transferring the rental agreement to the new renter. The rental provider must give their consent in writing. The new renter’s name will then be added to a new or altered rental agreement.

There is no standard form for asking a rental provider to transfer a rental agreement, or for one renter to transfer the agreement to another renter.

The rental provider must give their consent to transfer the rental agreement, unless there is a good reason to refuse.

Rental providers cannot charge a fee for giving their consent, or refuse consent if a renter won’t pay a fee.

If the rental provider agrees to the transfer, they can ask the renter to pay reasonable costs for preparing a new rental agreement document. Reasonable costs means costs that most people would think are fair.

If the renter is refused consent and thinks it is unfair, they can  apply to VCAT  to decide that the transfer can go ahead without the rental provider’s consent. 

Once the rental agreement has been transferred, the new renter takes over all the previous renter’s responsibilities, such as rent payments.

Transferring a rental agreement without consent

If the renter transfers their rental agreement without the rental provider’s written consent, they can be asked to leave. The rental provider can end the rental agreement with both the old and new renters and ask them to leave the property in 14 days. Read more about rental providers giving notice to vacate  .

Transferring the bond 

If bond has been paid, the rental provider must also notify the Residential Tenancies Bond Authority (RTBA) of the transfer. The rental provider must do this within five days of the transfer taking effect. Read more about transferring the bond .

Sections of the Act

If you want to know what the law says about transferring the rental agreement, you can read these sections of the Residential Tenancies Act 1997 :

• Sections 82–84 – Assignment and sub-letting (residential rental agreements)
• Sections 195–198 – Transfer of rights and sale of caravans
• Sections 206ZZD–206ZZH – Assignment and sub-letting (Part 4A agreements)

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