A lease assignment occurs when a tenant fully transfers their lease to another party. This is particularly important for tenants who wish to get out of their leases early due to financial issues, especially if a landlord does not allow subleases. In general, the landlord must agree to the lease transfer, and usually records their consent to it via a document called a “license to assign.”

However, a landlord is generally required to give what’s called “reasonable consent” when deciding whether to allow a tenant to assign a lease or find a new tenant to sublease the property. For example, as long as potential (new) tenants have good credit and strong financials, a landlord should not arbitrarily deny the original tenant the ability to assign the lease or provide a sublease. In addition, some leases have a clause which stipulates the specific time period in which a landlord must decide whether to approve a new tenant for lease assignment.

While a sublease can be for only part a leased premises, in most cases, a lease assignment must be for the entire premises. For instance, if a tenant leasing a 10,000 sq. ft. property wanted to lease out only 4,000 sq. ft. to another party, they would typically have to do so through a sublease rather than via a lease assignment.

Finally, some leases also stipulate that if a lease is assigned to a new tenant, and the original tenant profits (usually due to the sale of the business), the landlord has a right to a certain share of those profits.

A lease assignment in commercial real estate can be beneficial for tenants who want to transfer their lease to another party. Benefits include:

• The ability to transfer the entire leased premises, rather than just part of it.
• The potential to make a profit from the sale of the business.
• The ability to find a suitable replacement tenant.
• The potential to reduce financial liability for the landlord.

It is important to note that the original tenant may still be liable if the new tenant defaults, unless the landlord releases them from their liability. Additionally, landlords may be picky about which tenants they allow, and may want to ensure that the new tenant is at least as creditworthy as the previous one. Creditworthiness may be measured in EDBITA, business net worth, or other metrics. Source

Lease assignments in commercial real estate carry some risks for the original tenant. Unless the original tenant is fully released from their liability by the landlord, they will be legally liable if the new tenant defaults. This means that the landlord could sue the original tenant for back rent if the new tenant fails to pay.

In addition, landlords may be especially picky in their choice of tenants when it comes to triple net leases, as they are often trying to reduce their financial liability as much as possible. They will typically want to ensure that the new tenant is at least as creditworthy as the previous one. Creditworthiness may be measured in EDBITA, business net worth, or other metrics. In many cases, they also want to know that the leased property is at least somewhat important to the new tenant’s business operations— otherwise, the tenant may be more likely to let the property fall into disrepair, or, even worse, default on their lease.

Finally, some leases also stipulate that if a lease is assigned to a new tenant, and the original tenant profits (usually due to the sale of the business), the landlord has a right to a certain share of those profits.

A lease assignment occurs when a tenant fully transfers their lease to another party. The landlord must agree to the lease transfer, and usually records their consent to it via a document called a “license to assign.”

However, a landlord is generally required to give what’s called “reasonable consent” when deciding whether to allow a tenant to assign a lease or find a new tenant to sublease the property. For example, as long as potential (new) tenants have good credit and strong financials, a landlord should not arbitrarily deny the original tenant the ability to assign the lease or provide a sublease. In addition, some leases have a clause which stipulates the specific time period in which a landlord must decide whether to approve a new tenant for lease assignment.

While a sublease can be for only part a leased premises, in most cases, a lease assignment must be for the entire premises. For instance, if a tenant leasing a 10,000 sq. ft. property wanted to lease out only 4,000 sq. ft. to another party, they would typically have to do so through a sublease rather than via a lease assignment.

Finally, some leases also stipulate that if a lease is assigned to a new tenant, and the original tenant profits (usually due to the sale of the business), the landlord has a right to a certain share of those profits.

The steps involved in a lease assignment in commercial real estate are as follows:

• The tenant must fully transfer their lease to another party.
• The landlord must agree to the lease transfer and usually records their consent to it via a document called a “license to assign.”
• The landlord is generally required to give what’s called “reasonable consent” when deciding whether to allow a tenant to assign a lease or find a new tenant to sublease the property.
• The landlord must decide whether to approve a new tenant for lease assignment within a specific time period, as stipulated in the lease.
• In most cases, a lease assignment must be for the entire premises.
• If the original tenant profits (usually due to the sale of the business), the landlord has a right to a certain share of those profits.

When assigning a lease in commercial real estate, it is important to ensure that the new tenant is at least as creditworthy as the previous one. Creditworthiness may be measured in EDBITA, business net worth, or other metrics. Additionally, the landlord may want to ensure that the leased property is at least somewhat important to the new tenant’s business operations. It is also important to note that a lease assignment must be for the entire premises, and not just part of it. Finally, some leases also stipulate that if a lease is assigned to a new tenant, and the original tenant profits, the landlord has a right to a certain share of those profits.

Sources:

• https://www.nreionline.com/net-lease/tips-negotiating-triple-net-lease-sublets
• www.commercialrealestate.loans/commercial-real-estate-glossary/lease-assignment