Saturday, July 11, 2009

subletting , assignment and lease

Tenants, especially those subject to long-term leases, may desire to assign or sublet all, or part, of their leased space. A lease assignment occurs when all of a tenant's rights and obligations are transferred to another party. However, the assignor remains liable for the promised rent unless relieved in writing of this responsibility by the owner.
A sublease occurs when the original tenant transfers only a subset of his or her rights to another. For example, the tenant may transfer only a portion of the leased premises or transfer occupancy rights for period of time less than the remaining lease term.
Usually, the new tenant pays rent to the original tenant, who in turn pays to the owner the rent stipulated in the original contract. Once again, however, the original tenant remains liable for fulfilling the terms of the original lease.
Unless otherwise prohibited in the lease contract, a tenant may assign the lease or sublet. However, commercial owners, as a condition of the lease, can prohibit assignment and subletting or, alternatively, clearly state the conditions under which one or both strategies may be employed.
There are numerous reasons why a tenant may wish to engage in a sublease or assignment. Perhaps the tenant has sold his or her business and no longer requires the space, or perhaps the tenant's business has grown to the point that more space is required. Conversely, the tenant's business may have encountered financial difficulties and, as a result, he or she is seeking to reduce the firm's leased space.
Assignment and subletting can be major problems in commercial leases. Owner must seek to control who occupies space in their building. Otherwise, unqualified tenants may default on sublease payments, engage in an unsafe or hazardous business, or disrupt the property's tenant mix

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