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Assignment and Assumption of Tenant's Interest (Commercial Lease Transaction) (Long Form) (NY) | Practical Law

Assignment and Assumption of Tenant's Interest (Commercial Lease Transaction) (Long Form) (NY)

Practical law standard document w-005-8949  (approx. 26 pages).

Assignment of Lease: How It Works and Parties Involved

Jump to section, what is an assignment of lease.

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

You can view an example of a lease assignment here .

How Lease Assignment Works

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

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

Difference Between Assignment of Lease and Subletting

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

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

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

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

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

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

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

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

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

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

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

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

Get Help with an Assignment of Lease

Do you have any questions about a lease assignment and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from real estate lawyers who specialize in lease assignment.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment of Lease Lawyers

Joshua is an experienced attorney with deep expertise in finance, corporate, and business law. He offers practical legal solutions and personal service. As Managing Partner of Soloway Group PC, he advises startups, growing companies and investment funds on key issues, from formation to fundraising, stock issuances, trademarks and general business. He started out structuring funds and transactions at PwC before launching his own firm in 2009. He has been a partner in several New York law firms and has founded several companies including a banking firm, a real estate business, and a Cleantech company. Joshua has also served as Chief Legal Officer and Chief Strategy Officer of several companies in the tech, real estate, consulting, and sustainability industries. Prior to law school he was an early employee at a SoftBank-backed startup until it’s acquisition. Over the years, Joshua has helped many clients to launch, finance and grow successfully.

Sarah brings together her accounting and legal background to help solve client problems. Sarah couples her broad, general commercial legal background with our client’s international and business problems to arrive at elegant solutions that work for their business.

Hi, I'm Sarina. Thank you for taking the time to read my bio! In 2019, I graduated summa cum laude from Capital University Law School. While in law school, I was a staff member and editor on the Capital University Law Review. I was also involved in the Volunteer Income Tax Assistance Program and Operation Legal Help Ohio, a program which provides legal assistance to veterans. One of the highlights of my law school experience was my externship with Judge Jeffrey Sutton in the United States Court of Appeals for the Sixth Circuit. After law school and passing the Ohio bar exam, I worked for two years as an associate at an AmLaw 100 law firm, where my practice focused on corporate, healthcare, and regulatory law. I then took an in-house position at one of the largest insurance brokerage firms in the USA, where I oversaw corporate governance, mergers and acquisitions, contracts negotiations, intellectual property, and other general corporate matters. Specifically, I am proficient in business law, navigating due diligence during acquisitions, contract drafting and review, and providing effective advice in the nuanced field of regulatory law. I prioritize responsiveness and thoroughness. Please do not hesitate to reach out to me with any questions!

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I’m an Attorney working out of Marion, Ohio. Born and raised in Toledo, Ohio. I completed undergrad at the University of Toledo. I completed law school at Barry University in Orlando, Florida.

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Assignment of Lease

Contract to lease land from a church?

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

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

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How to Break a Lease in NYC

A lease is a binding legal contract, and your landlord has no obligation to let you break it. Even if you may think it’s in your landlord’s best interest to let you out of the lease, that likely won’t happen. However, breaking a lease in NYC is still possible, even if your landlord doesn't want to let you out of it. 

hash-mark Table of Contents

How to Break a Lease in NYC Breaking a Lease in NYC Tips How To Do a Lease Assignment in NYC Breaking Your Lease vs Subleasing the Remainder of Your Lease How To Find Someone To Take Over Your Apartment Lease? Breaking a Lease in NYC Bottom Line

hash-mark How to Break a Lease in NYC

• Review Your Lease
• Speak With Your Landlord
• Get Everything in Writing
• Perform Your Agreed Obligations
• Sign the Paperwork to Formally Break Your Lease

1. Review Your Lease

The first step to break your NYC apartment lease is to review the terms of your lease. Check to see if it includes an opt-out clause or details specific to subletting or breaking your lease. If it does, you'll also want to check the requirements, which might include a fee. This fee can range from anywhere between a thousand bucks to 3+ months rent but is typically set at either 1 or 2 months rent. You’ll also likely need to give your landlord at least 30 days’ notice of your intention to break the lease.

2. Speak With Your Landlord

After reviewing your lease, you’ll need to speak with your landlord. Explain your situation and see what your options are. Landlords understand that it’s in their best interest to have a tenant who is happy, stable, and financially secure in place, and will likely have a specific policy in place for how you can get out of your lease.

If your lease doesn't have an opt-out clause, they will often ask you to either find a new tenant for an apartment lease takeover via a lease assignment or to find someone to sign a brand new lease with them before they let you break your contract and surrender the apartment.

3. Get Everything in Writing

The next step in breaking a lease in NYC is to put everything in writing. Whatever you and your landlord agree to, be sure to document it in writing. Depending on what your lease says, you may even need to draft a formal document that you and your landlord both sign. This will be your proof in the event that there are future misunderstandings. 

4. Perform Your Agreed Obligations

After everything is put down in writing, it's time to fulfill your obligations to break the lease.  If your lease has an opt-out clause, you will just need to pay the applicable fee to break the contract. If you need to find a r eplacement tenant to sign a new lease in your place, you’ll need to market your apartment and find a suitable candidate to present to your landlord. They’ll sign a new 12-month lease at the market rate, and then your contract with the landlord will be broken. It used to be that most landlords wouldn’t charge you a fee in this scenario, but nowadays, fees ranging from $250 to $1000+ are commonplace.  

5. Sign the Paperwork to Formally Break Your Lease

The final step in breaking your lease is to sign the paperwork. Typically, your landlord will have a standard lease cancellation agreement, which will reference the original lease and confirm the date of the lease break. This agreement should also detail how the security deposit and move-out are handled, as well as any remaining obligations you and the landlord have to each other.  

hash-mark Breaking a Lease in NYC Tips

• Follow Your Landlord's Procedures
• Be Clear With Your Intentions

1. Follow Your Landlord's Procedures

The most important thing to do when breaking a lease in NYC is to follow all landlord procedures. Many times tenants will ask their landlord if they can break or assign their lease but do not follow the proper procedures, delaying the process significantly.

2. Be Clear With Your Intentions

You should also be clear with your intentions when breaking a lease. If they tell allow you to break your lease, be sure you clearly tell your landlord that you will be actively working on getting out of your lease and ask for their permission in writing.  The last thing you want is to find someone who wants to move in only to be told that their application can’t be processed until you send a certified letter to your landlord’s corporate headquarters formally asking for permission to assign/break your lease. 

hash-mark How To Do a Lease Assignment in NYC

• Understand How Lease Assignments Work
• Market Your Lease Assignment
• Be Prepared to Explain Any Drawbacks

1. Understand How Lease Assignments Work

If you cannot break your NYC lease a great alternative is to assign your existing contract to a new tenant. But before you can do a lease assignment it's imortant to understand how the process works. A lease assignment is similar to finding a new tenant to sign a new lease, except for the fact that they’ll just be taking over your existing contractual obligations.

The next step for a lease assignemnt is to speak with your landlord and ask about their requirements. Some landlords may force your hand and accept either only an assignment or only a break with a tenant signing a new 12-month contract, so make sure you speak with your landlord to find out what your options are before you start marketing your place.

3. Market Your Lease Assignment

After you understand the procedure for a lease assignment, it's time to market your apartment. Depending on what your landlord wants you can target different types of prospective tenants. For example, one  advantages of a lease assignment are that the incoming tenant will generally be grandfathered into your current rental price, which will typically be lower than current market rates. There will also be no broker fee for the assignment, so this will appeal to many tenants looking for a deal. 

A Lease assignment can also work well for anyone who is looking for a shorter term, as prices will be significantly lower than other short-term rentals. One thing to note is that many landlords do charge a lease assignment fee that typically ranges from $250-$750+. 

4. Be Prepared to Explain Any Drawbacks

Lease assignments can also have some drawbacks which you should be prepared to explain to the new tenant. The main disadvantage of a lease assignment is that the unit is usually rented “as-is,” meaning the landlord won’t come in and clean, prep, and paint before the new tenant moves in. This, combined with the fact that the term will likely be for a shorter period of time than a traditional 12-month lease, might make it less attractive to prospective renters. 

5. Sign the Lease Assignemnt and Transfer the Lease

Once you've found a tenant that wants to take over your lease that your landlord approves, it's time to make it formal. Your landlord will prepare a lease assignment rider, which you, the new tenant, and the landlord will all need to sign. It will detail the date which on which the lease is assigned and when the new tenant can formally take possession of the apartment. 

hash-mark Breaking Your Lease vs Subleasing the Remainder of Your Lease

Some owners may not allow a lease break or assignment as they have the legal right to refuse one. But, you have the right to ask for a sublet in NYC . The landlord can charge a 10% sublet fee. However, this is rare. An owner would typically prefer a lease break or lease assignment as it's better for everyone.

Sublets involve an added element of risk for all parties. For you, the "sublessor," you'll still be responsible to the landlord for the apartment and rent. So, if the new tenant, the "sublessee," skips rent, damages the apartment, or stays too long, you may be on the hook.

For the sublessee, there’s typically an element of uncertainty as there is no long-term guarantee that the landlord will offer them a new lease.

The landlord also faces extra risk. They may not get to screen a sublessee as well as they’d like. Sublets do not have to submit a standard NYC apartment application with the landlord. This means that sublessees do not have to meet the landlord’s income requirements. 

hash-mark How To Find Someone To Take Over Your Apartment Lease?

Whether you decide to go for a lease break, assignment, or sublet, it can be challenging to find someone to take over your lease in NYC. You'll need to move quickly and market your apartment in as many places as possible.

Many websites let you list your place if you're breaking you lease in NYC. They include LeaseBreak, Craigslist, Renthop, and Facebook groups like Ghostlight Housing. You can also post your apartment on StreetEasy, but the fee to do so is relatively high. That being said, Streeteasy is the largest real estate website in NYC.

hash-mark Breaking a Lease in NYC Bottom Line

We always recommend trying to assign or break your lease whenever possible, even if it means paying a fee. Subletting your apartment might seem like a tempting way to save some money, but it presents additional risk.

Do your best to negotiate a deal to break your lease with your landlord or find someone who wants to take over your existing NYC apartment lease or sign for a 12-month term with your landlord. This will ensure you are no longer liable for the apartment once you move out.

If you decide to sublet, the safest thing you can do is ask for additional security deposits or pre-payment of rent for the entire sublease upfront. It is also essential to get the landlord’s approval. Ideally, your landlord will put in writing that you will not be held accountable for any damages or monetary liabilities that occur upon the termination of your contract with the landlord (for example, if the sublessee does not vacate the apartment and refuses to pay rent past the expiration of the lease). 

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Getting Landlord Approval for a Lease Assignment in New York

You have the right to assign your lease in new york, as long as your replacement is as financially qualified as you..

Many New York landlords, especially in NYC, will have their own processes for lease assignments—so don't spend too long drafting your own paperwork. Once you've found a potential candidate, check in with your landlord to learn more about the assignment process. Your landlord will probably ask for three things:

• A standard rental application for your proposed assignee
• A letter describing your situation
• A draft of an assignment agreement

Once you've submitted this paperwork, the law in New York only allows your landlord to refuse your request for specific reasons. If your landlord ignores you (or denies your request for no reason), then they must release you from your lease. They need to do this within 30 days of your request for the release, according to state law.

If, on the other hand, your landlord "reasonably" denies the assignment—that is, they have a viable business concern about the replacement tenant you've found—you're out of luck. Your assignee needs to meet (or exceed) the qualifications you met when you were approved for the apartment, including credit scores, eviction history, and anything else your landlord assessed during the approval process .

This means it's generally pretty easy to figure out if a landlord's rejection was reasonable: if your potential assignee's credit score or income is lower than yours, then their refusal is probably reasonable and you can't get released from your lease.

Related articles

The information provided on this website does not, and is not intended to, constitute legal advice.

Assignment and Assumption of Lease Agreement (Commercial Lease) (NY)

This assignment and assumption of lease agreement template transfers a tenant’s interest under a commercial lease of New York real property to a third party. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. This template assumes that the tenant is assigning all of its rights and obligations under a commercial lease for the remainder of the lease term. If the tenant / assignor desires to transfer less than all of its interest under the lease, a sublease as opposed to an assignment should be used. For a template, see Sublease Agreement. Prior to assigning its lease, assignor should review the lease to determine if landlord consent is required. This template includes an optional consent of landlord and a release of tenant by landlord from further liability under the lease. Pursuant to N.Y. Tax Law § 1402(a), New York imposes a real estate transfer tax on instruments that assign or transfer an interest in real property where the consideration is in excess of $500, which tax is applicable to a transfer of an interest in a lease where (1) the term exceeds 49 years, (2) substantial capital improvements are or may be made by or for the benefit of the lessee, and (3) the lease is for substantially all of the premises constituting the real property. See N.Y. Tax Law § 1401(e). For information on assignment and assumption of lease agreements, see Lease Assignments. For further information on landlord’s consent to a lease assignment, see Lease Assignments.

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Lease assignments are rental apartment opportunities where the current tenant is looking to "assign" the remaining months on his or her lease to a new incoming tenant.  In addition to lease assignments, we are also including sublets and true "lease breaks" in this category. 

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Assignment and Consent Standards in Commercial Leases

Mar 6, 2020

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

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

What If The Lease Does Not Contain An Assignment Provision?

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

What Does Reasonable Mean?

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

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

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

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

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

What Are Typical Provisions In an Assignment Clause?

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

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

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

Retail Lease

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

Office Lease

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

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

• John G. Kelly

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NYC Commercial Real Estate Law & Federal Court Litigation

Can a landlord refuse consent to lease assignment.

        Many distressed business owners come to me and ask Can a Landlord Refuse Consent to Lease Assignment? A business owner’s lease can be one of its most valuable assets. When negotiating a new lease, many business owners do not consider how this will affect the eventual sale of their businesses. A one-sided lease with assignment provisions requiring the landlord’s consent in his absolute discretion may scare away prospective buyers.

        Tenant’s opinions as to whether or nor not the assignee is a suitable tenant can be very different from Landlord’s. The tenant may see the proposed assignee has having a solid business plan but a landlord, possibly not being familiar with the tenant’s industry, may not agree and view the assignee as a future eviction. The tenant has the burden of proving the landlord acted unreasonably and the prerequisites for the landlord even considering the request are that the tenant cannot be in default and must comply with often burdensome requests from the landlord for documentation pertaining to the proposed assignee.

           To prove a landlord has been unreasonable, the tenant must show one of two grounds for refusing consent; the landlord was arbitrary or capricious or based his refusal on personal taste, prejudice or convenience. Some standard provisions in lease assignment clauses that relieve the Landlord of even having to consider consent are whether the assignment would be in violation of another tenant’s lease in the building (many times landlords give exclusive rights to tenants that they will rent to competitors) or that the proposed assignee’s business will impose a burden on the building’s resources such as elevators, parking, etc. Other prerequisites to the landlord’s requirement to consider the assignment are that the assignee’s business be in compliance with the use clause in the original lease or that the proposed assignee has not been negotiating with the landlord for the other premises in the building.

       The tenant should always insist on language in the lease’s assignment clause requiring that the landlord not unreasonably withhold, delay or condition consent to an assignment. In that case, the landlord will have an obligation to review the information given by the tenant in a timely manner. If he fails to do so, he can be found liable for unreasonably withholding consent.

         In most states, landlords are not required to be reasonable when it comes to giving consent to their tenants for the assignment of a leased space. However, this majority view of landlords having “sole discretion” in granting consents is gradually changing in favor of the implied covenant of “good faith” and fair dealing. In jurisdictions where a party is required to act in “good faith,” denial of consent will not be permitted if it leads to the defeat of the tenant’s reasonably expected benefit of the bargain. This is the case even when a landlord has reserved the right to deny its consent for any reason.   There is no hard and fast rule pertaining to this. A determination by a Judge or an arbitrator as to whether a landlord has breached his duty to be reasonable will require a hearing on the particular facts of the proposed assignment. Generally landlord’s attorneys insert some ambiguous language regarding the acceptability of an assignee. This makes proving that the landlord acted unreasonably a lengthy and costly process. Most landlords insist in the lease that any potential relief be limited to specific performance, i.e. if they lose, they must accept the proposed assignee but the tenant will not be awarded any monetary damages. Even if the tenant were to win, this is often a pyrrhic victory, the potential assignee has probably moved on to other opportunities.

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Auction house Bonhams to move Manhattan flagship to Steinway Hall

111 W. 57th St.

One of the world's oldest and largest auction houses is moving its Manhattan flagship location to the historic Steinway Hall on Billionaires Row.

Bonhams, the more than 200-year-old auctioneer with 15 salerooms across the globe, announced Tuesday that it signed a lease for 42,000 square feet at 111 W. 57th St. — the landmarked, 16-story building at the foot of Central Park that was once home to the Steinway & Sons piano manufacturer.

The international firm, which collects and sells luxury and antique items, is moving its New York headquarters from 580 Madison Ave. and in the process taking 30% more space for its retail footprint. The new location, between Sixth and Seventh avenues, is set to open late next year.

Bonhams will occupy part of the landmarked Steinway Rotunda, as well as the 80-foot glass atrium next door, designed by SHoP Architects, and plans to host nearly 50 live auctions each year, the firm said. The new auction house will be designed by the global architecture firm Gensler. News of Bonhams' move was first reported by the New York Post . 

Anna Crowley, a representative for the property, declined to provide the terms of Bonhams' lease agreement, neither the length of the lease nor how much the company is paying per square foot. The cost of ground-floor retail space at a nearby property, 853 Seventh Ave., however, is listed on LoopNet for between $96 and $266 per square foot.

Brokers Jackie Totolo, Pierce Thompson, Adam Weinblatt and Robert Cohen of Newmark represented the development team, which includes Apollo Commercial Real Estate Finance, JDS Development, and Property Markets Group, in the transaction, while brokers Kenji Ota and Jennifer Konefsky of Cushman and Wakefield represented Bonhams.

Founded in London in 1793, Bonhams celebrated its strongest year in 2023, with more than $1.1 billion in revenue, marking a 14% increase from the year prior, the firm said. Led by Hans-Kristian Hoejsgaard as its executive chairman, Bonhams is famous for its valuable collectables, such as the 1962 Ferrari 250 GTO Berlinetta it sold for $38.1 million in California in 2014 — at the time making it the most expensive car to be sold at auction.

Steinway Hall is no stranger to international lure. The West 57th Street building also features 14 luxury residential units, one of which was acquired several months ago by His Majesty King Charles III on behalf of the Canadian government, Crain's reported in July.

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