Assignment of Lease
Jump to section, need help with an assignment of lease, 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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Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.
Creative, results driven business & technology executive with 24 years of experience (15+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.
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Why You Should Negotiate a Lease’s Assignment and Subletting Clause
If you are not effectively negotiating the assignment and subletting cause in your lease, you are not leveraging one of the most important benefits of being a franchisee.
Ninety percent of startup businesses fail.
For many landlords looking to lease their ground floor retail space, franchisee tenants are an attractive proposition for several reasons. One, there is a track record. The landlord isn’t giving an improvement allowance and paying brokerage commissions in connection with a lease to a new concept tenant that may fail and force the landlord to re-market the space again soon. A franchise is a true-and-tried concept with a brand recognition that should be able to drive traffic and justify the investments by the landlord.
Secondly, the franchisee has been vetted to a certain extent by the franchisor. In awarding territory to a franchisee, the franchisor will consider a few factors, such as, net worth, liquid cash, and operational excellence. So, the landlord is not getting an individual with just a good idea but with no clue on how to execute the idea. The franchisor will have guardrails and processes in place, which have previously proven successful, to ensure that the franchisee will be successful.
Thirdly, many franchisors will negotiate the lease on behalf of their franchisees. Though this may seem counterintuitive, this is actually another indication of the franchisor’s commitment to the success of its franchisee.
One of the most important provisions in any lease is the assignment/subletting clause. For any tenant, it is the tenant’s exit strategy in the event the business plan does not work out as contemplated. The tenant must plan out the exit strategy at the time that the lease is being negotiated. The strategy should not, and cannot be, that “I will figure something out with the landlord if I need to.” That is not a strategy; that is wishful thinking.
There are certain provisions that the franchisee should negotiate in the assignment/subletting section of its lease that are unique to a franchise. A franchisee may be successful in its current location, but for various reasons may need to sell the business. The most attractive assignees are the franchisor and another franchisee. A landlord will be more than happy to accept a franchisor as the entity on the lease since that is the “mothership” and the landlord is getting a more creditworthy entity on the lease. What about an assignment to another franchisee?
Landlords may not be as eager to allow another franchisee to assume the lease without the landlord’s consent. A tenant may argue that the landlord’s consent should not be unreasonably withheld, conditioned or delay. But franchisees should consider taking this further.
Tenants will argue that the other franchisee has already been vetted by the franchisor, so the risk to the landlord is minimal. In fact, the landlord may not even know which franchisee is operating from the location because there will be no change in the method of operation.
Below is negotiated language from a transaction that a franchisee may consider using in its lease with respect to assignments of the lease to another franchisee.
“Notwithstanding anything to the contrary herein, without the need for Landlord’s consent, but upon at least thirty  days’ prior notice to Landlord [provided, however, if due to the confidential nature of the transaction prior notice is not possible, then within ten  days following the consummation of the transaction], Tenant will have the right to assign this lease to another franchisee, so long as such franchisee meets the following requirement [and reasonable proof is provided to the Landlord]:
1. The Franchisee has at least 3 years’ experience in operating [–] [Insert the type of business in general] in [Insert the geographic area where the store is located];
2. The Franchisee has completed the Franchisor’s training;
3. The Franchisee has a net worth of [$–]; and
4. The Franchisee has deposited with Landlord an additional security deposit in the amount of [$–].”
Note that the blanks are to be negotiated and are deal dependent.
The above requirements satisfy the two main requirements for a successful operation of a franchise. First, having the financial wherewithal to run the business and make contributions into the business should the need arise. Second, and the more important requirement, having the operational expertise to make sure that the business can actually make money and be successful.
By negotiating a provision similar to the provision above, the original franchisee has carved out a reasonable and practical exit strategy. Without it, the original franchisee has failed to take advantage of one of the unique features of a franchise. And not that this negotiated provision doesn’t intend to pull a fast on the landlord. Both parties benefit and ultimately it is practical solutions to issues that allow deals to be completed.
Amol K. Pachnanda is a founding partner at Ross Katz & Pachnanda PLLC based in New York City. He helps his clients expertly negotiate their leases in order to achieve their business goals. You can connect with him on LinkedIn, where he shares his knowledge in his popular “LeasingMinute” segment.
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Commercial Lease Assignment and Sublet Provisions
A balancing act for landlords and tenants, july 2020 by adam f. aldrich.
This article identifies common problems involved in commercial lease transfers through assignments and subleases. It offers both landlords and tenants tips for solving these problems when negotiating assignment and sublease provisions in leases.
The modern commercial lease is a complex, integrated document that attempts to balance the competing interests of the landlord and tenant. As a result, commercial leases are the subject of much negotiation and are never “one size fits all.” In fact, commercial leases are one of the least standardized documents in real estate practice.
When any commercial lease is to be transferred in part through a sublet or in its entirety through an assignment, the issues multiply. The transfer provisions, which once seemed moot, become operative to determine whether the lease can be transferred and, if so, under what conditions. If, during lease negotiations, the parties overlooked the lease transfer provisions or gave them cursory consideration, they may be unpleasantly surprised by the result. While landlords and tenants have divergent economic interests with respect to transferring the lease, their legitimate concerns can be appropriately addressed through thoughtfully crafted transfer provisions.
This article explores common problems, issues, and solutions encountered in commercial lease transfers through assignments and subleases. It is intended to be useful both to the lawyer who infrequently encounters lease transfer problems and the seasoned practitioner who deals with lease transfer issues every day.
Distinguishing Between an Assignment and Sublease
Assignments and subleases have fundamental differences that are frequently misunderstood. A lease is both a conveyance of an interest in property and a contract. 1 After executing the lease, the landlord and tenant are bound to one another by privity of contract and by privity of estate. As a result, they may each enforce the provisions of the written lease through privity of contract and the promises that arise from privity of estate. 2 Privity of contract allows enforcement of the lease provisions, while privity of estate allows enforcement of only those promises that run with the land. 3
Whether the landlord, tenant/assignor, and subtenant/assignee call their arrangement an assignment or a sublease, courts typically look at the substance of the transaction. In an assignment, a tenant transfers its entire interest in the lease. 4 After assigning its interest in the lease, the assignee has privity of estate with the landlord, but the assignee and the landlord are not in privity of contract unless the assignee assumes the tenant’s obligations under the lease. 5 Assignment of the lease ends the original tenant’s rights to possession, but absent an express release under the lease terms, its liability under the lease continues. 6 This means the original tenant remains secondarily liable for the assignee’s obligations under the lease. Thus, the tenant/assignor may find itself liable at a future date if the assignee fails to perform its obligations under the lease.
In a sublease, however, the tenant transfers less than the remaining term or less than the tenant’s entire interest in the lease, leaving the original tenant with a reversionary interest in the lease. 7 The relationship between the original landlord and the original tenant, including both privity of contract and privity of estate, remains intact, thereby creating the relationship of landlord and tenant between the original tenant (sublandlord) and the new tenant (subtenant). The original landlord and the subtenant have no privity of estate or privity of contract with one another, so the original tenant remains liable for the actions and omissions of the subtenant. 8 However, the subtenant’s rights will terminate with the original lease or when the landlord declares a forfeiture of the tenant’s lease term. 9
A third, less common type of transfer is a partial assignment of a lease. Such assignments are called assignments “pro tanto,” not subleases, because they grant possession of a portion of the leased premises to the new tenant for the balance of the lease term. 10 The landlord now has two tenants and, in effect, two leases. There is little guiding case law on this hybrid lease transfer, so it is not entirely clear whether the assignee has a contractual relationship with the landlord. 11 Due to the vagaries and uncertainties that can result when a transfer of possession encompasses less than all of the space, partial assignments should be avoided. To avoid assignments pro tanto, landlords should consider prohibiting assignments of less than the original tenant’s entire interest in the lease. If a landlord proceeds with a partial assignment, it should clearly document the arrangement, including the rights and remedies of the landlord, original tenant, and new tenant, and acknowledge the transaction as a partial assignment and not a sublease. 12
The accompanying table illustrates the many differences between an assignment, sublease, and partial assignment. 13
Restrictions on Assignments and Subleases
Colorado law favors the free transferability of rights. 14 As a result, landlords frequently attempt to limit the tenant’s right to transfer the lease by including lease provisions specifically restricting the tenant’s right to assign or sublet. Under Colorado law, outright prohibitions against assignments are permissible and are not considered invalid restraints on alienation. 15 Even if outright prohibitions on assignments or subletting are enforced, such provisions “are construed against the restriction.” 16 This means a court generally will construe such stipulations “against the party invoking them.” 17 A breach of the restriction against transfer does not terminate the lease, 18 but may give rise to a claim for default. 19 Generally, tenants in commercial leases negotiate exceptions to strict prohibitions against assignments or subletting because transfer provisions may be their only viable exit strategy if they find they can no longer afford the space or no longer need it.
Consent to Assignments and Subleases
Recognizing that absolute prohibitions are neither favored by the courts nor acceptable to most tenants, some landlords include modified prohibitions in their leases that limit the tenant’s rights to transfer the lease and, if a transfer is permitted, allow the landlord to enforce the lease against both the original tenant and the new tenant to the maximum extent possible. Such provisions may reserve to the landlord, either in its sole discretion or without unreasonably withholding its consent, the right to approve a proposed lease transfer. Although the reservation of the landlord’s right to approve a proposed assignment or sublease is for the landlord’s benefit, 20 the landlord is bound to the standards set out in the lease for consents to an assignment or sublease. 21 Accordingly, once the landlord has established the standards for its consent in the lease, it cannot object to a proposed assignment or sublease if the tenant has met the appropriate requirements.
It is well established in Colorado law that “without a freely negotiated provision in the lease giving the landlord an absolute right to withhold consent, a landlord’s decision to withhold consent must be reasonable.” 22 Thus, if a lease contains a provision against subletting or assignment, but is silent on a landlord’s right to withhold consent, Colorado law forbids the landlord from withholding its consent unreasonably if the tenant tenders a suitable subtenant or assignee to the landlord. 23
Disputes often arise as to what is a ‘‘reasonable” withholding of the landlord’s consent. This debate has led to the enunciation of specific standards of reasonableness. If a lease provision “requires that consent to an assignment will not be unreasonably or arbitrarily withheld, a landlord is held to the standard of conduct of a reasonably prudent person.” 24 Therefore, a landlord must only consider “those factors that relate to a landlord’s interest in preserving the value of the property,” 25 which do not include “[a]rbitrary considerations of personal taste, convenience, or sensibility . . . .” 26 Whether a landlord has acted reasonably is a fact-specific inquiry. 27 Most courts have held that the tenant bears the burden of proving that the landlord acted unreasonably in withholding consent, 28 but some courts have required the landlord to prove it acted reasonably. 29 Courts have been divided on a tenant’s right to terminate a lease where the landlord has been found to have unreasonably withheld consent. 30
There are several reliable rules that courts follow in determining whether a landlord acted reasonably. First, a landlord cannot refuse consent for racial or other discriminatory reasons. 31
Second, a landlord may not deny consent to improve its general economic position or to receive increased rent. 32 However, a landlord may deny consent to protect its interest in the value, condition, and operation of the property or the performance of lease covenants. 33 For example, in Cafeteria Operators L.P. v. AMCAP/Denver Limited Partnership , the tenant leased the premises to run a cafeteria-style restaurant. 34 After several failed attempts to operate the restaurant, the tenant marketed the space to prospective subtenants, including non-cafeteria restaurant owners. 35 When a non-cafeteria restaurant owner expressed interest in subleasing the premises, the tenant sought the landlord’s approval to the proposed sublease, but the landlord refused. The Court found that the landlord reasonably withheld consent because the proposed sublessee would have changed the “character” of the shopping center by operating “the largest restaurant of its kind, raising concerns about lighting, maintenance, traffic, and parking.” 36 Moreover, the subtenant would sell alcohol and stay open late, and its proposed occupancy raised “concerns about security, safety of patrons, and parking requirements.” 37 Similarly, the Court in List v. Dahnke found that the landlord reasonably withheld consent where the landlord determined that a Thai-American restaurant operated by the assignee would not be successful at that location, but the Court did not identify the facts that led the landlord to such conclusion. 38
Third, a court may make a finding of unreasonableness if a landlord refuses consent to a proposed transfer without obtaining relevant information to make its decision. 39 Before making the decision, the landlord should obtain sufficient information on the transferee’s financial condition; the transferee’s experience in operating its business; how the premises are to be used; projected sales, gross income, and income per square foot; and, in the case of a sublease, the size of the subleased space. 40
Fourth, courts may consider how long it takes the landlord to make the decision on the requested assignment. If the landlord instantly refuses consent or waits too long to make a decision, the court could make a finding of unreasonableness. 41 Conversely, if the tenant fails to allow the landlord a reasonable amount of time to issue a decision, the withholding of consent can be found reasonable. 42 In Parr v. Triple L&J Corp. , the Court found that the landlord unreasonably withheld consent when it deferred making a decision on the proposed assignment, thereby delaying the sale of the tenant’s business until the prospective buyer withdrew his offer. 43 The tenant sought approval from the landlord for an assignment of the lease as part of the sale of its business. The landlord requested all personal and financial information on the proposed assignee and the assignee’s business plan, and the tenant provided prompt responses that demonstrated the assignee’s experience in restaurant management and “perfect credit score.” 44 Because the landlord unreasonably withheld consent, the landlord was held liable to the tenant under a breach of contract theory, as well as for lost profits on the sale of its business. 45
Similarly, the Court in Bert Bidwell Investors Corp. v. LaSalle and Schiffer, P.C. addressed whether the landlord unreasonably withheld consent to the tenant’s request to transfer the lease where the assignee was “ready, willing, and able to assume the lease as written, and to use the premises for the same business as that of the tenants.” 46 The landlord ultimately refused consent because it “didn’t like” the proposed assignee. 47 Based on the lease, which required the landlord’s consent to assign, the landlord argued that it “had the right to relet the premises as it saw fit and to be arbitrary in doing so.” 48 Relying on List , the Court found that the landlord acted unreasonably in refusing to accept the proposed new tenant. 49 Nevertheless, parties may create their own standards and definition of reasonableness, and if they do, courts will enforce and apply such standards. 50
As these cases illustrate, if a landlord wishes to withhold consent absent a sole and unconditional contractual right to do so, it must have fact-based reasons for doing so and cannot arbitrarily withhold or delay its consent. The landlord should communicate its decision in writing to the tenant and enumerate all fact-based reasons to preserve all arguments for reasonableness. 51 Before making the request to assign or sublet the premises, the tenant should gather information about the proposed assignee’s or subtenant’s financial status, business acumen, and proposed operations, and then submit this information to the landlord, along with an assignment or sublease document signed by the tenant and assignee or subtenant. While the landlord must still consent to the transaction, 52 such documentation places the tenant in a stronger position to rebut any superficial or arbitrary reasons the landlord may proffer for denying consent. And if litigation ensues, it will be critical for the tenant’s case to show that it supplied the landlord with as much information as possible concerning the assignee’s or subtenant’s financial status and operations, to avoid having the trier of fact determine that the landlord acted reasonably in denying consent due to a lack of information from the tenant.
Recapture, Termination, and Renewal Rights
Leases may grant the landlord the right to terminate the lease and to retake the tenant’s space if the tenant wishes to assign its lease or sublet its space, or if the tenant transfers the lease without the landlord’s consent. Replacing the tenant by recapturing the premises can benefit both the landlord and the tenant, but each party will want to weigh the pros and cons of such an agreement.
Terminating the lease allows the landlord to eliminate existing lease weaknesses and to enter into a new lease with a potentially better tenant on a clean slate. Moreover, recapturing the premises and directly leasing it to the proposed assignee can save the landlord substantial dollars in tenant improvements that can be passed on to the new tenant through reduced or free rent for a portion of the lease term. But the landlord must pay close attention to market conditions before terminating the lease. Terminating the lease in a strong market when space is at a premium and rents are high allows the landlord to enter into a new lease with a new tenant at a higher rate, but the landlord may take a loss on its investment in the premises in a down market when rates are depressed and there is an oversupply of space.
The tenant, on the other hand, risks losing its investment in its business and the leased premises. Before requesting a transfer, the tenant should closely scrutinize the lease to determine the potential outcome. Under some leases, the act of notifying the landlord of an intent to assign or sublet can trigger the recapture provision. 53 Similarly, if the lease is assigned without the landlord’s consent, it may trigger the recapture right if that right is expressly provided in the lease. 54 Landlords should closely review the recapture language before terminating the lease because restraints on alienation and lease forfeitures are disfavored. 55
When a tenant violates the transfer provisions by transferring the lease without the landlord’s consent, the landlord should send a notice of default to the tenant and demand that the default be cured by nullifying the transfer, 56 unless the lease provides that transferring the lease is an automatic termination. If the tenant is unable to nullify the transfer when it receives the notice, it could be liable for default damages incurred by the landlord. 57 If the tenant does not cure the default and the landlord will not approve (and has the right not to approve) the assignee or subtenant, the landlord may terminate the lease (or the tenant’s right to possession) if the lease so permits. 58 If the landlord fails to terminate the lease 59 or accepts rent after breach of the anti-assignment clause, 60 it may be deemed to have waived the right to terminate. Once the lease is terminated as a result of the default, the landlord must consider its duty to mitigate damages. 61
If the space is recaptured and the lease terminated, the tenant’s lease obligations will be terminated with respect to all recaptured space, including the payment of rent. 62 Moreover, the tenant will no longer have privity of contract or estate with the landlord, assignee, or subtenant because the lease will be terminated as to the tenant. 63 If the landlord recaptures the premises, the tenant is spared the rent expense while it finds a transferee. But if the landlord does not recapture, the tenant can make a transfer without fear that the landlord will then exercise its recapture rights.
Another important issue is whether an option to renew contained in a lease assigned or subleased to a third party remains exercisable following the transfer. If the assigned lease gives the original tenant a renewal option, the assignee can extend the term unless the renewal option is reserved from the assignment. 64 If a tenant/sublandlord grants its subtenant an option to renew based on the tenant’s option in the prime lease, the subtenant is dependent on the tenant/sublandlord for a lease extension because it does not have contractual privity with the landlord. 65 If the tenant/sublandlord refuses to exercise its renewal option so as to enable the subtenant to take advantage of the rights that were granted to it, the tenant may be liable to the subtenant. 66 To protect its option to renew, the subtenant should request or require a recognition agreement from the landlord when negotiating a sublease, whereby the landlord agrees to recognize the sublease if the prime lease terminates due to the tenant/sublandlord’s default. 67
The Impact of Bankruptcy Proceedings on Assignments and Subleases
Bankruptcy laws can have a significant impact on commercial leases when the tenant files for bankruptcy protection. Generally, a trustee is appointed to administer the bankruptcy estate, except in Chapter 11 cases where the debtor-in-possession is the tenant. 68 For debtors with executory contracts and/or unexpired leases, 11 USC § 365 contains a series of rules that govern those documents. Section 365 of the bankruptcy code provides the tenant/debtor with the statutory right to assume or reject executory contracts and unexpired leases to which it is a party, subject to objections by creditors and other parties-in-interest, and ultimately the court’s approval. 69 The debtor may, in turn, assign the lease if the assignee provides “adequate assurance of future performance.” 70 During the period between filing the bankruptcy petition and the date on which the lease is assumed or rejected, the tenant must continue to pay rent and perform the material terms of the lease. 71 It should be noted that written waivers of § 362’s automatic stay have been found to be unenforceable unless they are part of a previous bankruptcy proceeding. 72 Thus, landlords should not assume that a waiver in the lease is enforceable if the tenant files for bankruptcy.
From the debtor’s perspective, the right to reject the lease is “vital to the basic purpose of Chapter 11” because it can free the tenant from the obligation to pay all future rent under the lease. 73 If a lease is rejected with bankruptcy court approval, the debtor has no legal interest in the lease or the leased premises, and it must vacate the leased premises. If, however, the debtor fails to vacate the premises, the landlord can file a motion to lift the automatic stay so it can file or continue an eviction action in state court. If the debtor rejects the lease, the landlord may have a claim for “rejection damages” pursuant to 11 USC § 502(b)(6), subject to the mitigation-of-damages duty. 74
As a condition to assuming the lease, the debtor must cure all monetary defaults and provide adequate assurances of future performance under the lease. 75 A debtor who assumes the lease may be able to assign the lease free of restrictions on transfer set forth in the lease and over the landlord’s objection, 76 which may turn out to be a significant right for the debtor if it holds a below-market lease with sufficient time remaining on the lease term. However, a bankruptcy court has discretion to reject an assignment if it finds, for example, that the assignment would disrupt the tenant mix by changing the image of a shopping center or violating the use restriction in the lease. 77 A landlord may favorably view the debtor’s assumption because it assures continuation of the lease and the cure of existing defaults. But if the tenant is holding a below-market lease, the landlord may favor rejection to enable it to negotiate a new lease. A landlord may object to the debtor’s attempted lease assumption if the landlord disagrees with the debtor’s plan to cure the default or believes the debtor has not provided adequate assurance that the default will be cured or the debtor will perform in the future.
Section 365(b)(3)(C) of the bankruptcy code provides specific protections for “a lease of real property in a shopping center” by providing that no assignment can occur without assurances that use clauses and other provisions vital to the operation of the shopping center will continue to be performed, “including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center.” The purpose of § 365(b)(3)(C) “is to preserve the landlord’s bargained-for protections with respect to premises use and other matters that are spelled out in the lease with the debtor-tenant.” 78 Moreover, § 365(b)(3)(D) requires adequate assurance “that assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center.” Despite the bankruptcy code’s language protecting shopping centers, some bankruptcy courts have found lease provisions that limit the use of the shopping center premises to be per se restraints on alienation. 79 To avoid an adverse ruling if a shopping center tenant files for bankruptcy, a landlord should arm itself with as much evidence and expert testimony as possible to show a disruption in tenant mix or a real potential for violating other tenants’ rights if an assignment is allowed. 80
While a tenant’s bankruptcy filing places the lease in limbo, a landlord can be proactive by approaching the tenant to determine whether it intends to reject or assume the lease. Landlords and tenants should not treat the existing lease as a static document that presents the tenant with a “take it or leave it” proposition for assumption. If the tenant voices concerns about the current lease, the landlord can renegotiate the lease to entice the tenant to assume a modified lease (subject to court approval) that keeps the tenant in the premises and paying rent.
Negotiating Lease Transfer Provisions
Negotiating lease transfer provisions is an important process for both the landlord and the tenant because, at some time in the future, the landlord or the tenant may be forced to accept a previously unknown or undesirable counterparty to the lease. It is critical that attorneys impress upon their respective clients the short-term and long-term ramifications that could result from their negotiations of the lease transfer provisions. Landlords and tenants should consider the following issues when negotiating assignment and subletting provisions.
The Landlord’s Perspective
- The landlord’s primary objective in negotiating assignment and subleasing provisions is control , including control over the mix of tenants and control over the use of the leased premises. Thus, the landlord will use the transfer provisions to protect its interests in the premises.
- A landlord’s foremost concern is almost always the tenant’s ability to pay rent, in full, on a timely basis. A landlord should negotiate requirements that a prospective assignee or subtenant must meet, such as minimum net worth and minimum gross sales.
- The landlord can protect itself by including a right to recapture the premises if a tenant seeks to assign its lease or to sublet its premises. However, landlords should carefully consider whether to include language that terminates the lease automatically upon receipt of an assignment request because it could constitute a restraint on alienation, which is disfavored, and the landlord may prefer the leasehold to continue. 81
- The landlord should keep the original tenant on the hook. Landlords should oppose any transfer provision that relieves the original tenant of its obligations under the lease upon an assignment. Having a tenant with a vested interest in the assignee’s ability to perform the lease is helpful to ensure that a lease is transferred to a worthy transferee. Additionally, in the event the assignee does default, if the original tenant’s liability has been preserved, the landlord’s chances of recovery are improved.
- The landlord should limit the use rights of a subsequent assignee or subtenant. A landlord should seek to protect its right to control the mix of tenants, particularly in retail settings, so as not to violate exclusive use provisions. 82 Moreover, exclusives and use restrictions held by other tenants at a shopping center must be considered in conjunction with a potential change in use that may occur upon assignment or subletting.
- The landlord should seek to share in excess rent. 83 For example, where a tenant assigns its lease or subleases its premises, it may be paid more than the amount the tenant is obligated to pay the landlord under the lease. If the assignment or sublease had not been entered into, those same financial accommodations would theoretically have been available to the landlord if it had leased directly to the assignee or subtenant. Accordingly, a landlord should seek the right to share in this excess financial consideration along with the tenant, or if it has the leverage, to obtain 100% of such excess.
The Tenant’s Perspective
- The tenant’s goal is maintaining flexibility. The tenant’s ability to maintain flexibility through the lease largely depends on its leverage to negotiate favorable lease terms. A new business seeking space in a desirable retail shopping center may have little or no leverage to negotiate the transfer provisions, but a large corporation leasing significant space may have considerable negotiating strength. Thus, it is imperative that the tenant’s leasing broker and attorney understand the market forces at play in any lease negotiation.
- The tenant should seek flexibility to share the leased premises or certain portions of it (i.e., floor space, utilities, and parking) with its related entities and affiliates with which it has a business relationship, without having to seek the landlord’s consent in each instance. This issue is particularly important for large companies with divisions that operate under different business names.
- The tenant should also seek flexibility to restructure its organization without the landlord and the lease acting as an impediment to such alteration, by negotiating into the lease specific language permitting such changes. The tenant’s ability to reorganize its business, either through a merger, consolidation, or sale, could be delayed or impeded by the landlord under the transfer provisions if these provisions are not properly negotiated at the letter of intent stage or before the lease is executed.
- The tenant should maintain an exit strategy if the premises no longer satisfy its business needs because it has outgrown the space or needs less space. This is particularly important in the era of COVID-19. For example, start-up companies can quickly outgrow their leased premises, but if the landlord does not have more space available, the company must seek out new or additional space, frequently at a higher rate. Conversely, a change in economic forces can cause the tenant’s business to quickly retract. Thus, prospective tenants should be mindful to negotiate termination and rights of first refusal options for newly available space in the same building, with the end goal of ensuring that the size of their leased space does not impair their business objectives. 84
- The tenant should insist that the landlord’s right to approve a lease transfer not be unreasonably withheld, if the landlord insists on reserving such right. The lease should detail the specific standards the tenant must meet to obtain approval, such as the transferee’s minimum net worth and minimum business experience.
- Counsel for the tenant should attempt to include a provision for automatically releasing the tenant and any guarantor from further liability at the time of the lease transfer or after the transfer occurs if the assignee or sublessee can meet or exceed certain financial marks, such as net worth, sales, or revenue.
- The tenant should negotiate (1) the right to revoke a transfer request during a defined period after the landlord issues a notice to terminate and recapture the premises, and (2) a reasonable period to vacate the premises before the tenant will be subject to eviction proceedings if the tenant does not revoke the transfer request. Where the landlord insists on a termination and recapture provision, this rescission right provides a tenant the flexibility to stop the recapture process according to the tenant’s particular circumstances and commercial exigencies.
The relationships established between the parties to a lease, sublease, or assignment can be complicated. While the ability to transfer the lease can be a valuable tool for the tenant, the landlord’s interest in protecting its investment by choosing its occupants is equally compelling. However, a balance can be struck that provides the tenant the flexibility it needs while preserving the landlord’s control and minimizing its risk. During lease negotiations, both parties should recognize that changing circumstances during the lease term could trigger the need to assign the lease or sublet the premises. If thoughtful attention is given to negotiating the transfer provisions, the parties can assure themselves that, if the need arises to transfer the lease, their respective interests will be reasonably protected.
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Adam F. Aldrich is the founder of Aldrich Legal, LLC, a Denver-based law firm focused on real estate and business transactions and litigation—(303) 325-5683. Coordinating Editor: Christopher D. Bryan .
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1 . Schneiker v. Gordon , 732 P.2d 603, 606 (Colo. 1987) (recognizing the “dual nature of a lease” as both a contract and a conveyance of an interest in land).
2 . Id. at 606–07.
3 . Shaffer v. George , 171 P. 881, 882 (Colo. 1917).
4 . Gordon Inv. Co. v. Jones , 227 P.2d 336, 340 (Colo. 1951).
5 . Shaffer , 171 P. at 882.
6 . Roget v. Grand Pontiac, Inc. , 5 P.3d 341, 345 (Colo.App. 1999) (“after the assignment, the assignee becomes primarily liable for the obligations under the contract, while the assignor remains secondarily liable”).
7 . Gordon Inv. Co. , 227 P.2d at 340.
8 . J.E. Martin, Inc. v. Interstate 8th St. , 585 P.2d 299, 301 (Colo.App. 1978) (“the delegation of duties under a lease and their assumption by a third person do not absolve the original lessee, absent the lessor’s knowledge and consent, simply by virtue of the conduct of the lessee and third party”). See also 1 Friedman and Randolph Jr., Friedman on Leases § 7:7.2 (Practising Law Institute 5th ed. 2013).
9 . V.O.B. Co. v. Hang It Up, Inc. , 691 P.2d 1157, 1159 (Colo.App. 1984).
10 . Friedman and Randolph Jr. , supra note 8 at § 7:4.2.
11 . Barbuti, “Assignments Pro Tanto And Why To Avoid Them,” 22 The Practical Real Estate Lawyer 24, 24–25 (Sept. 2006).
12 . Id. at 24.
13 . Id. at 23 (reprinted in part).
14 . Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co. , 874 P.2d 1049, 1052 (Colo. 1994) (“Contract rights generally are assignable, except where assignment is prohibited by contract or by operation of law or where the contract involves a matter of personal trust or confidence”).
15 . Union Oil Co. of Cal. v. Lindauer , 280 P.2d 444, 447 (Colo. 1955). See also Malouff v. Midland Fed. Sav. and Loan Ass’n , 509 P.2d 1240, 1243 (Colo. 1973) (recognizing that “[t]he common law doctrine of restraints on alienation is a part of the law in Colorado”).
16 . Friedman and Randolph Jr., supra note 8 at § 7:3.3. See also Malouff , 509 P.2d at 1243 (holding “that the question of the invalidity of a restraint depends upon its reasonableness in view of the justifiable interests of the parties”).
17 . Beck v. Giordano , 356 P.2d 264, 265 (Colo. 1960).
18 . Lindauer , 280 P.2d at 447.
19 . Fink v. Montgomery Elevator Co. of Colo. , 421 P.2d 735, 738 (Colo. 1966).
20 . Routt Cty. Mining Co. v Stutheit , 72 P.2d 692, 693 (Colo. 1937).
21 . Parr v. Triple L & J Corp. , 107 P.3d 1104 (Colo.App. 2004).
22 . Cafeteria Operators L.P. v. AMCAP/Denver Ltd. P’ship , 972 P.2d 276, 278 (Colo.App. 1998).
23 . Id. See also Basnett v. Vista Vill. Mobile Home Park , 699 P.2d 1343, 1346 (Colo.App. 1984) (holding that a landlord may not unreasonably refuse consent under a silent consent clause because that result “incorporates the principles of fair-dealing and reasonableness and also preserves freedom of contract”), rev’d on other grounds , 731 P.2d 700 (Colo. 1987).
24 . List v. Dahnke , 638 P.2d 824, 825 (Colo.App. 1981).
25 . Cafeteria Operators L.P. , 972 P.2d at 279.
26 . List , 638 P.2d at 825.
28 . Ring v. Mpath Interactive, Inc. , 302 F.Supp.2d 301, 305 (S.D.N.Y. 2004); Toys “R” Us, Inc., No. 88 C 10349, 1995 U.S. Dist. LEXIS 14878 at *111 (N.D.Ill. Sept. 29, 1995); Restatement (Second) of Prop.—Landlord and Tenant § 15.2 cmt. g (American Law Inst. 1976).
29 . E.g., Campbell v. Westdahl , 715 P.2d 288, 293 (Ariz.Ct.App. 1985).
30 . Friedman and Randolph Jr., supra note 8 at § 7:3.4 (citing cases).
31 . Cent. Bus. Coll. v. Rutherford , 107 P. 279, 280 (Colo. 1910); List , 638 P.2d at 825 (dictum).
32 . Kendall v. Ernest Pestana, Inc. , 709 P.2d 837, 845 (Cal. 1985).
33 . Id. at 845. See also Econ. Rentals, Inc. v. Garcia , 819 P.2d 1306, 1317 (N.M. 1991).
34 . Cafeteria Operators L.P. , 972 P.2d at 277.
36 . Id. at 279.
38 . List , 638 P.2d at 825.
39 . Toys “R” Us, Inc. , U.S. Dist. LEXIS 14878 at *124 (landlord’s refusal before it has relevant information that should be obtained in making the consent decision may be unreasonable).
40 . Shaffer, The Sublease and Assignment Deskbook at 80–81 (American Bar Ass’n 2d ed. 2016).
41 . Compare Parr , 107 P.3d at 1107 (affirming trial court’s ruling that the landlord unreasonably withheld consent where the landlord delayed consent, which caused the proposed assignees to withdraw their offer to purchase the business) with Toys “R” Us, Inc. , 1995 U.S. Dist. LEXIS 14878 at *124 (landlord’s refusal before it has relevant information that should be obtained in making the consent decision may be unreasonable).
42 . Fahrenwald v. LaBonte , 653 P.2d 806, 811 (Idaho Ct.App. 1982).
43 . Parr , 107 P.3d at 1106.
45 . Id. at 1107.
46 . Bert Bidwell Inv. Corp. v. LaSalle and Schiffer , P.C., 797 P.2d 811 (Colo.App. 1990).
47 . Id. at 811.
48 . Id. at 812.
50 . Toys “R” Us, Inc. , 1995 U.S. Dist. LEXIS 14878 at *115 (citations omitted) (“where a lease contains provisions giving further meaning to a reasonableness clause, the standard of reasonableness varies”); Shaffer, supra note 40 at 80–81.
51 . Golden Eye, LTC v. Fame Co. , No. 0603166/2007, 2008 N.Y. Misc 8571 at *16 (N.Y. Gen Term Jan. 16, 2008) (“the Court may not determine reasonableness if withholding consent is based on grounds that were not included in the letter refusing consent”).
52 . Shaffer, supra note 40 at 74–75.
53 . Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc. , 826 P.2d 710 (Cal. 1992).
54 . Lindauer , 280 P.2d at 447.
55 . Murphy v. Traynor , 135 P.2d 230, 231 (Colo. 1943).
56 . Shoemaker v. Shaug , 490 P.2d 439, 441 (Wash.Ct.App. 1971) (finding that the tenant was not in default of the anti-assignment provision because it could reassign the lease back to itself).
57 . La Casa Nino, Inc. v. Plaza Esteban , 762 P.2d 669, 672 (Colo. 1988) (citing Schneiker v. Gordon , 732 P.2d 603 (Colo. 1987)).
58 . Gordon Inv. Co. , 227 P.2d at 260–61 (tenant’s subletting was held a breach that permitted landlord to terminate the lease).
59 . Shakey’s Inc. v. Caple , 855 F.Supp. 1035, 1043–44 (E.D.Ark. 1994) (holding that the landlord was estopped from terminating a lease on account of an unapproved sublease because the landlord did not act promptly).
60 . Merkowitz v. Mahoney , 121 Colo. 38, 42 (Colo. 1949) (“It is the general rule that any act done by a landlord, with knowledge of an existing right of forfeiture, which recognizes the existence of the lease is a waiver of the right to enforce the forfeiture”); Werner v. Baker , 693 P.2d 385, 387 (Colo.App. 1984) (“the lessor’s acceptance of rent accruing after the breach of an anti-assignment clause, with knowledge of the breach, constitutes a waiver of the right to terminate the lease for breach of that clause”). Cf. Nouri v. Wester & Co. , 833 P.2d 848, 851 (Colo.App. 1992) (holding that waiver of conditions against assignment by accepting rent did not carry over to other provisions in the lease).
61 . La Casa Nino, Inc. , 762 P.2d at 672.
62 . Carma Developers (Cal.), Inc. , 826 P.2d 710.
63 . Schneiker , 732 P.2d at 611.
64 . Friedman and Randolph Jr., supra note 8 at §§ 7:5.1 and 7:7.1.
65 . Tiger Crane Martial Arts Inc. v. Franchise Stores Realty Corp. , 235 A.D.2d 994, 995 (N.Y.App.Div. 1997) (“It is well settled that where, as here, a sublease is expressly made subject to the terms of a master lease, the subtenant has no legal right to compel the tenant to exercise an option for renewal of the entire demised premises in order to permit the subtenant to exercise an option for renewal of its subleased premises, absent proof of an agreement on the part of the tenant to exercise its option to renew for the benefit of the subtenant or evidence of special circumstances entitling the subtenant to such relief”).
66 . Burgess Pic-Pac, Inc. v. Fleming Cos. , 190 W. Va. 169, 175 (W.Va. 1993) (discussing liability of sublandlord to subtenant for failure to exercise renewal option after request from subtenant).
67 . Senn, Commercial Real Estate Leases: Preparation, Negotiation, and Forms , § 13.14 (Wolters Kluwer 6th ed. 2019).
68 . 11 USC § 1107.
69 . 11 USC § 365(a).
70 . 11 USC § 365(f)(2)(B).
71 . 11 USC § 365(d)(3).
72 . In re DB Capital Holdings, LLC , 454 B.R. 804, 816 (Bankr. D.Colo. 2011) (“waivers, unless they were part of a previous bankruptcy proceeding . . . should not be enforced”).
73 . NLRB v. Bildisco & Bildisco , 465 U.S. 513, 528 (1984); 11 USC § 502(b)(6).
74 . In re Shane Co. , 464 B.R. 32, 38–41 (Bankr. D.Colo. 2012) (discussing damages claim under 11 USC § 502(b)(6)).
75 . 11 USC § 365(b)(1).
76 . 11 USC § 365(f); In re Bricker Systems, Inc. , 44 B.R. 952 (Bankr. E.D. Wis. 1984) (recognizing that § 365(f) invalidates restrictions on assignment of contracts or leases by a debtor or trustee and allows assignment of assumed contracts at a later date).
77 . In re Federated Dep’t Stores, Inc. , 135 B.R. 941 (Bankr. S.D. Ohio 1991); In re Martin Paint Stores , 199 B.R. 258 (Bankr. S.D.N.Y. 1996), aff’d , S. Blvd., Inc. v. Martin Paint Stores , 207 B.R. 57 (S.D.N.Y. 1997).
78 . In re Trak Auto Corp. , 367 F.3d 237, 244 (4th Cir. 2004) (internal citation omitted).
79 . In re Bradlee Stores, Inc. , No. 00-16033, 2001 U.S. Dist. LEXIS 14755 (S.D.N.Y. Sept. 20, 2001) (holding that restriction on assignment violated the anti-assignment provisions of § 365(f)); In re Rickel Home Ctrs., Inc. , 240 B.R. 826, 832 (D.Del. 1998) (striking restrictive use provision).
80 . In re Trak Auto Group , 367 F.3d at 242 (enforcing use provision concerning the sale of automobile parts and accessories in shopping center lease); In re J. Peterman Co. , 232 B.R. 366 (Bankr. E.D.Ky. 1999) (rejecting assignment of shopping center lease where proposed assignment would violate radius restriction in lease and assignee did not sell similar merchandise as the original tenant). But see In re Toys “R” Us, Inc. , 587 B.R. 304, 307 (Bankr. E.D.Va. 2018) (overruling landlord’s objection to the debtor’s assignment on the grounds that it would violate the exclusivity provision of another lease in the shopping center and would disrupt the shopping center’s tenant mix and balance).
81 . Friedman and Randolph Jr., supra note 8 at § 7:1.1.
82 . In re Ames Dept. Stores, Inc. , 127 B.R. 744, 752–54 (Bankr. S.D.N.Y. 1991) (discussing rights of landlord to protect the tenant mix at the shopping center in the context of the lease and a subsequent bankruptcy filing of the tenant).
83 . Carma Developers (Cal.), Inc. , 826 P.2d 710 (upholding the landlord’s contractual right to capture excess rent).
84 . For an interesting discussion on the assignability of rights of first refusal, see Mitchell, “Can a Right of First Refusal Be Assigned?” 985 U. Chi. L. Rev. (2001).
As these cases illustrate, if a landlord wishes to withhold consent absent a sole and unconditional contractual right to do so, it must have fact-based reasons for doing so and cannot arbitrarily withhold or delay consent.
Lease Assignment Agreement
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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.
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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A lease assignment allows a tenant to “assign” and transfer the name of the lease, often the tenant, to someone else. The landlord must approve the tenant and, if accepted, an assignment will be executed by both parties. The assignee will be the new tenant and the original tenant will be released from the lease.
When a tenant can no longer make the monthly rent payments and knows someone that can replace them in the apartment. The landlord will be contacted and the new tenant will be screened by their credit score and background. If approved, an assignment will be written and ready for signature.
When a business is purchased and the old owner has no interest in the property. The landlord will be notified that the business is no longer owned by the tenant and will issue a lease assignment to make the new owner personally liable for the lease.
United States: Whose Lease Is It Anyway?
An assignment provision is undoubtedly one of the most important clauses in a commercial lease agreement. These agreements can last anywhere from three to five years — or even ten or more, with renewal options — and they are signed with no idea as to the future success, failure, or ownership of the tenant. If that tenant's ownership changes, will their lease remain the same?
Those considering whether to acquire or merge with a business with an existing lease agreement must consider existing assignment provisions as a factor. The sale of a tenant's business could trigger various options, which are typically at the landlord's election. The most extreme option would be the option to terminate the lease upon notice of the sale. Therefore, it is vital to carefully scrutinize and negotiate assignment provisions when entering into a commercial lease agreement.
If an assignment provision is unclear as to when the tenant can or cannot assign the lease, it can wreak havoc for commercial landlords and tenants alike. A specific question that arises in the context of an assignment is whether a sale or transfer of the ownership of the tenant's business constitutes an assignment of the lease agreement. For example, if the lease states that the tenant cannot assign the lease, is it considered an assignment if the tenant sells their business through a stock sale, and the new owner operates under the same name? Technically, the tenant remains the same, but the ownership of the tenant's entity has changed. If the lease does not address what happens in this type of situation, the court will have to interpret whether or not an assignment was made. Clear assignment language is rendered even more important by Ohio's lack of legal guidance on the enforcement of anti-assignment clauses in commercial leases when a tenant transfers ownership or control of their business.
Ohio courts generally consider an assignment as a full and complete transfer of all the interest of the assignor in and to the thing assigned. See City Of Cincinnati ex rel. Ritter v. Cincinnati Reds , 782 N.E.2d 1225 (2002).
Typically, parties are permitted to freely transfer contractual rights without obtaining permission from their counterparties. In Ohio, a commercial lease for real property is a contract as well as a conveyance of an interest in that property. Consequently, the Ohio courts will look to the principles of construction applicable to contracts and apply those principles to leases.
If a lease requires that the landlord consent to an assignment of a commercial lease, the prevailing view in Ohio is that a landlord's consent may be withheld for any reason, absent express language in the lease that consent not be unreasonably withheld. See F & L Center Co. v. Cunningham Drug Stores, Inc. , 482 N.E.2d 1296 (1984).
However, Ohio courts also view restrictions against the assignment of leases as a restraint upon the alienation of property, which are not looked upon with favor and are strictly construed. See Fairbanks v. Power Oil Co. , 77 N.E.2d 499 (1945); see also Littlejohn v. Parrish , 163 Ohio App.3d 456, 2005-Ohio-4850, 839 N.E.2d 49 (1st Dist.).
This means that, absent specific language restricting ownership transactions or mergers, courts generally will not interpret common anti-assignment clauses as prohibiting the transfer of equity interests in either the entity burdened by the provision or any parent entities.
The dearth of case law on this subject leaves some question as to the specificity required for courts to interpret an anti-assignment provision to prohibit a change in tenant ownership.
Illustrative of the uncertainty is Triple R Associates v. Checkers Drive-In Restaurants , Cuyahoga C.P., No. CV 17 888561 (October 15, 2019).
The trial court, in ruling on cross-motions for summary judgment, ruled in favor of the landlord, finding that transfers involving a tenant's corporate great-grandparent and great-great-great-grandparent companies violated the applicable anti-assignment clause in the lease.
The anti-assignment clause being construed in Checkers restricted the transfer of any membership interest or effective control of the tenant. It included both specific and broad catchall terms that the landlord argued clearly and unambiguously covered the kinds of corporate transfers at issue in the case.
Specifically, the clause required the landlord to consent to the transfer by "sale, assignment, bequest, inheritance, operation of law or other dispositions" that resulted in "a change in the present effective control of Tenant." The landlord maintained that, regardless of how distant the relevant transactions appeared on an organizational chart of the tenant, the "effective control" of the tenant was directly implicated by the transfers because the transactions led to an overhaul of the tenant's entire ownership structure and board.
Before these transfers, the landlord had agreed to provide the tenant with below-market rent due to the tenant's underperforming business. In negotiating the lease terms, the landlord insisted on very broad restrictions on assignment to prevent being stuck with below-market rent long term.
The court found that the landlord was entitled to judgment in its favor as a matter of law on its breach of lease claim against the tenant. The judgment was never appealed, and the parties eventually settled.
While the trial court did not explain its decision in its order, it likely concluded that even strictly construing the clause at issue, its broad language ("effective control") explicitly covered the particular transactions that occurred (which did result in changes to the tenant's ownership structure and board), and the landlord was entitled to judgment in its favor as a result.
On the other hand, some may view the Checkers decision as inconsistent with the traditional approach of strictly interpreting anti-assignment provisions.
In the end, Checkers highlights the importance of clarity in negotiating anti-assignment clauses to leave as little as possible for the courts to interpret in the event of a later conflict.
The best way to provide clarity in an anti-assignment provision is to negotiate and define what type of sale or transfer constitutes a change in control of the tenant's business; this is commonly referred to as a change in control clause. A change in control clause identifies the percentage of the tenant's business that must be sold or transferred before an effective assignment has been made. The threshold in a change in control clause should be negotiated but typically falls around 30% to 51%.
Clarity in the assignment provision benefits landlords and tenants alike. An assignment of the lease typically requires written notice and the landlord's consent. If the tenant does not know when to provide notice of an assignment because the lease lacks a threshold, the tenant could be in default. The landlord, on the other hand, benefits by knowing who their tenant is and how the operation of the tenant's business may affect the overall success of the landlord's real estate.
Should your client find itself in a situation where it believes a tenant has assigned its lease in violation of an anti-assignment provision, it should thoroughly consider the practical ramifications of lease termination, in addition to the legal issues and consequences.
In addition to the time and expense of going to court, terminating a lease requires finding new tenants, cleaning the premises, removing abandoned property, and potentially renovating the property in preparation for a new tenant.
If possible, consider engaging with the entity to whom the lease has been assigned to explore the possibility of negotiating a new lease or a lease amendment with more favorable terms, with the idea that both parties would be saving the time and expense of protracted litigation.
With the uncertainty as to how an Ohio court would interpret an anti-assignment provision, plus the cost of litigation, landlords and tenants alike can benefit from negotiating a change in control clause. Remember: an ounce of negotiation prevents a pound of costly litigation.
Originally published by Cleveland Metropolitan Bar Association .
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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Assignment of residential lease with landlord consent — How to guide
updated September 7, 2023 · 11min read
2. dos & don’ts checklist, 3. assignment of residential lease (with landlord consent) instructions.
Occasionally, tenants want 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 enterprise to a third party. Whatever the reason, tenants can transfer their lease interests to new parties by completing an assignment of the lease.
An assignment is the transfer of one party’s entire interest in and obligations under a lease to another party. The new tenant takes on the lease responsibilities, including rent and property maintenance, and the original tenant is released from most (if not all) of its duties.
Successful property management begins with good documentation, and a properly-drafted and executed assignment will ensure that all parties – new and old – understand the obligations that are being transferred and the responsibilities that each will have under the new arrangement. In every way, this lays the foundation for a great (and long-lasting) landlord/new tenant relationship.
- An assignment is the complete transfer of one party’s interest in an agreement to a third party. In this case, the original tenant is giving all of his or her interest to a new tenant. That new tenant steps into the shoes of your old tenant, and your old tenant is released from most of his or her 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 still remains ultimately liable for residual obligations under the lease, or any failures of the new tenant to meet his or her 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.
- Be sure the Assignee gets a copy of the original lease. He or she will be bound by its terms, and should know what his or her new obligations and rights are. A copy should be attached to the Assignment as Exhibit A.
- The original tenant cannot assign more rights than it has under the original lease. For example, if the term of the lease is 1 year, the term of the assignment cannot be 2 years.
- Most leases will require the landlord’s written consent before an assignment becomes effective. Review the original lease agreement for additional information, and to see if there are other requirements that must be met to make the transfer valid.
- Although a landlord is not required to consent to a lease assignment, in some cases your lease will state that a landlord’s consent will not be “unreasonably” withheld. This is more common in commercial leases. What is considered unreasonable varies from jurisdiction to jurisdiction and you should review the laws in your area (and the language in your original lease agreement) for additional information. On the other hand, if the lease states that the landlord may use his or her “sole discretion” to evaluate the new tenant, he or she can veto this assignment without any reason.
- 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 certain time may itself be deemed consent. In some cases, it may give a tenant grounds to terminate the lease. Review the original lease and your state’s laws for additional details.
- A landlord may consider only proper factors when deciding whether or not to consent to an assignment. Some criteria will be considered impermissible by courts (e.g., refusal is based on race or sex of the proposed new tenant). If your landlord does not consent to your attempted assignment, make sure he or she gives you clear written reasons for the decision. Failure to provide such reasons can itself be deemed unreasonable.
- 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.
- State laws governing real estate, renting, leasing, and assignments vary widely, and can have a tremendous effect on your arrangement. In some cases, specific information must be included in the assignment and in others, language must be excluded form your agreement. Review your state and local laws for additional information about what is required in your area.
- If your agreement is complicated, do not use the enclosed form. Contact an attorney to help you draft a document that will meet your specific needs.
The following provision-by-provision instructions will help you understand the terms of your assignment. The numbers below (e.g., Section 1, Section 2, etc.) correspond to provisions in the form. Please review the entire document before starting your step-by-step process.
- Introduction. Identifies the document as an assignment of lease. Write in the date on which the assignment will become effective (often the date on which it is signed). Identify the parties and, if applicable, what type of organization they are. Note that each party is given a name (e.g., “Assignor”) that will be used throughout the agreement. The current tenant is called the “Assignor,” because he or she is the person who is assigning the interest. The new tenant is called the “Assignee.”
- Recitals. The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. In this consent, the recitals include a simple statement of the parties’ intent to assign the Assignor’s interest in the Lease and the Assignee’s intent to assume it. Provide a brief description of the property being rented, and the name of the landlord under the Lease. Attach a copy of the Lease to the consent as Exhibit A. Describe the property that is being assigned. You don’t need to include a full legal description, but provide enough information so it can be clearly identified. 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 being assigned, make that clear in this description.
- Section 1: Assignment. The Assignor’s assignment of its right and interest in the Lease to the Assignee. This paragraph 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, this should be clearly noted in the space provided. Delete the bracketed phrase if this does not apply to your arrangement.
- Section 2: Assumption of rights and duties. Provides that the Assignor is no longer responsible for the duties listed under the Lease (e.g., rent, maintenance of property, etc.). There are two options provided regarding the continuing liability of the Assignor. In the first, the Assignor is completely released from any liability it had under the Lease. If the Assignee defaults, for example, the Landlord cannot seek payment from the Assignor. In the second, the Assignor will be liable to the Landlord if the Assignee defaults. Select the option that best suits your arrangement, and delete the other. Note that, in any event, the Assignor will remain responsible for any obligations that occurred before the assignment. In other words, if damage happened to the apartment before the transfer, or if the Assignor did not fulfill another obligation under the Lease, the Assignor remains responsible.
- Section 3: Reimbursement. In many rental relationships, amounts are paid in advance or deposited as security for the landlord. At the end of the lease, this money (with deductions subtracted or interest added) is returned to the tenant. If a lease 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.
- Section 4: Indemnification. The Assignee’s promise to bear the financial cost of any injury the Assignor suffers as a result of its assignment, and any lawsuits that may arise from its activities on the Premises. Note that there is an exception carved out for things done by the Assignor before the Effective Date of the Assignment – the Assignor remains responsible for those actions.
- Section 5: Continuing effectiveness of lease. Emphasizes that except for the assignment, the original terms of the Lease are still effective.
- Section 6: Assignor’s Representations and Warranties. Lists the Assignor’s promises under the Assignment. Note that this is not a detailed list of services to be provided. Rather, this is the Assignor’s assurance that the Lease and the rental interest that it’s providing is useful (i.e., that no one else lives or has an interest in the place, that the lease is still in effect, that the Assignor is not behind in rental payments, etc.). If there are additional representations you think the Assignor should be making, feel free to include those here.
- Section 7: Condition of premises. Notes that the Premises are not being warranted to be perfect or useful in a particular way. Rather, the Assignee is taking the rented property for what it is, and is accepting it in that state.
- (Optional) Section 8: Additional terms of assignment. An optional provision allowing the Assignor and the Assignee to include any representations, warranties, or other provisions particular to their situation. If you remove this section, correct the section numbers and the references in the document.
- Section 9: Interpretation. Provides that both Parties were on equal footing in the negotiation of the consent to assignment. In many cases, contracts are interpreted in favor of the individual who did not draft it. This clause makes clear that both Parties were involved in the drafting, and so the document should not be read in favor of (or against) either.
- Section 10: Notice. Lists the addresses to which all official or legal correspondence should be delivered. Write in a mailing address for both the Assignor and the Assignee.
- Section 11: Modification. Indicates that any changes to the document are ineffective unless they are made in writing and signed by both Parties.
- Section 12: Governing law. Allows the parties to choose the state laws that will be used to interpret the document. Note that this is not a venue provision. The included language will not impact where a potential claim can be brought. Write in the applicable state law in the blanks provided. The governing law will almost always be that of the place where the apartment or rental building is located. It’s generally a bad idea to attempt to use a different location.
- Section 13: Counterparts/electronic signatures. The title of this provision sounds complicated, but it is simple to explain: it says that even if the Parties sign the Assignment in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of 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.
- Section 14: Entire agreement. The Parties’ agreement that the document they’re 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 will 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 in the space provided. Note that there are two options provided at the end of the consent. You may choose only one of these and should delete the one that you do not use. The first option corresponds to the brackets in Section 2 of the Assignment. If the Assignor will remain responsible under the Lease, even after the Assignment, include this first bracketed language in the consent. For example, if the Assignee doesn’t make rent payments, the Landlord will be able to get these payments from the Assignor. Delete the phrase “and Release” from the title of this paragraph if you choose this option. If the Assignor will not be responsible under the Lease, select the second bracketed phrase, which releases the Assignor from any remaining liability. In other words, the Landlord cannot look to the Assignor for damages or rental payments if the Assignee doesn’t perform any of its obligations under the Lease. If you include this clause, you can keep the bracketed language in the title of the paragraph (i.e., the title will be “Landlord’s Consent and Release”).
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Do you know the difference between roommates, subletting and lease assignment?
By Dilshad Burman
Posted November 17, 2023 6:17 pm.
Last Updated November 17, 2023 6:20 pm.
As per the Rental Tenancies Act (RTA), there are a few ways in which tenants can legally share their rental home or have someone else take it over from them in Ontario, but each is different and governed by a specific set of rules.
A tenant in Ontario can choose to share their rental home with roommates or move in a partner or spouse with no legal obligation to inform or take permission from the landlord.
“The way that I like to frame it generally is it’s frankly none of the landlord’s business who else lives in your unit,” says Don Valley Community Legal Services staff lawyer Karly Wilson.
“If you wanna add a tenant to a lease, then you have to obviously communicate that to the landlord because that’s a contract between the two of you. But if it’s just someone moving into the unit and they’re paying rent to you directly, and then you pay it to the landlord, that’s totally fine. As long as you’re not overcrowding the unit with too many people, it’s really not up to your landlord who lives there.”
- What you need to know about living with roommates in Ontario
Wilson says the terms of the lease, for example utilities being included and costs possibly increasing due to more use, have no bearing on the rights of the tenant to have roommates.
“It’s not a nice way to say it, but that’s something the landlord should have thought of when they were putting the lease together, if that was a concern,” she says.
In such a case, the leaseholder is responsible for the rent and roommates are not protected by the RTA nor do they have any recourse with the Landlord and Tenant Board (LTB).
Subletting a rental home is often confused with having a roommate or paying guest.
However, Wilson explains that subletting refers to the tenant temporarily renting their unit to someone else during a period in which they are not occupying it themselves.
“Necessarily for subletting, you have to have a set end date and you have to have an intention to return to the unit after that end date. So someone just takes your place for a period of time,” she says.
“The really common one you’ll see are students who have a one year lease, but they’ll go away for the summer or a co-op semester.”
Unlike with roommates, in order to sublet, the tenant must seek permission from the landlord.
“They essentially have to let you sublet unless they have a good reason not to. So reasons why a landlord might not want to let somebody sublet is if you’re offering a sublet to a particular person [who] has a bad credit rating or they have really bad landlord references, that’s a good reason. Or if you have sublet before and the subletters you’ve used have trashed the place or they haven’t paid rent,” says Wilson.
If a tenant believes a landlord does not have good reason or is arbitrarily refusing the sublet, they have the option to file an A2 form with the LTB requesting that the board order the landlord to give permission. On the other hand, if a tenant sublets the unit without the landlord’s permission, the landlord can file the same form with the LTB.
A hearing will then be held – but Wilson warns that there is currently over a year’s wait for A2s to be heard at the LTB.
Tenants are responsible for the sublessee’s behaviour and any damage or other problems that may arise. The duration of a sublet must also be less than the term of the lease.
“So if you’re on a one year lease, you can’t say I’m going to sublet it for 18 months. Right. What that also means is if you’re on a month to month lease, technically your sublet term has to be one month minus a day,” she adds.
“A lot of landlords will give consent to back to back sublets. So if you can only sublet for one month, they’ll [say] you can do four of those back to back to somebody else.”
The terms of the sublet must be the same as the lease and tenants cannot charge a sublessee more rent than they are paying or for any amenities included in the rent such as parking.
“[That is] very against the rules, very against the Residential Tendencies Act, and will absolutely get you busted,” says Wilson.
In case the tenant is unable to return to the rental unit or chooses not to, they are still responsible for the rent even if the sublessee moves out.
“You can ask the permission of the landlord to let that [person] become a tenant essentially, or you’re now on the hook to find someone to fill that spot,” says Wilson.
Assigning a lease refers to a tenant passing on a lease onto another person with no intention of returning to the rental unit.
“You’re taking the contract you signed and you’re giving it to a different person,” says Wilson.
If a tenant wants to assign their lease, they must ask the landlord for permission and in this case too, the landlord cannot refuse unless with good reason.
As with a sublet, if a tenant feels the landlord is unfairly refusing an assignment, they can file an A2 with the LTB and the landlord can do the same if a tenant assigns the lease without permission.
However, if a landlord refuses assignment or does not reply to the tenant’s request, a tenant can legally terminate their tenancy early — before the end of the lease term — with only 30 days notice, as opposed to the usual 60 days.
“So if you’re in a one-year lease and then three months in, your life changes and you ask your landlord, c’an I assign the rest of my tenancy, nine more months to somebody else?’ If they don’t reply or they just say flat ‘no’ without any reasons, then you can terminate your tenancy,” explains Wilson
In order to terminate the tenancy in such a case, the tenant would send the landlord an N9 notice which includes a section for refusal to assign.
The terms of the assignment remain the same as the lease and once it expires, it automatically becomes a month-to-month tenancy as it would have with the original tenant. The assignee is under no obligation to sign a new lease and rental terms cannot be changed by the landlord.
“So you signed a contract that says you are going to rent somewhere for 12 months and then it automatically turns to a month to month. If you give that halfway through to somebody else, they still have the same rights and responsibilities as you did. They are effectively taking your place as a tenant with all the rights, all the burdens that come with it,” says Wilson.
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Under the 10 Freeway: Immigrant businesses scraped by while landlord dodged Caltrans
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For more than a decade, Rudy Serafin showed up to his makeshift office underneath the 10 Freeway as the sun came out and the roar of the morning commute shook the ground below his feet.
With a generator, his cellphone and a portable toilet, the 49-year-old immigrant from Michoacán, Mexico, worked alongside a dozen others operating small businesses in spaces they rented between the concrete columns holding up the interstate. They were mechanics, truckers, garment suppliers, recyclers and pallet distributors, struggling to get by in the region’s economy. They paid rent to a Calabasas businessman who leased the land from Caltrans and, according to court records filed by the agency, illegally sublet it to them at far higher rates.
On Saturday, many of the renters’ dreams went up in the pallet-fueled inferno that caused such severe damage to the freeway that it is expected to be closed for weeks .
While officials say the cause of the fire was arson , many who worked there, with no fire alarms or sprinklers, say it was a disaster years in the making.
“I lost everything,” Serafin said. “We are not educated people. Most of the people are people that crossed the border, work hard, or maybe grew up here. But we are working-class people. We break our back to barely make a good living.”
Serafin sold hangers, elastic and wiring to the garment industry, and had been trying to unload the half a pallet of hand sanitizer that helped fuel the flames.
Their landlord, Apex, owned by Ahmad Anthony Nowaid, had failed to pay rent on the 48,000-square-foot triangular lot at South Alameda and East 14th streets for more than a year, and owed $78,000, according to Caltrans, which sued the company for back rent in September.
The property was one of five that Caltrans was attempting to evict Apex and another Nowaid company from, including a plot along the 5 Freeway in Sun Valley and another a block away from the fire. All told, Nowaid owed about $620,000 to Caltrans in unpaid rent as of September, the agency said in court filings.
Caltrans alleges that Nowaid’s firm secured leases of government-owned property with a host of restrictions, then turned around and broke the leases by illegally subletting to various businesses, including a tow company, a recycling firm, mechanics, a tree-trimming outfit and a trucking firm.
The lease for the land where the fire occurred said the property could be used only for parking operable vehicles and “open storage”; other uses required the approval of Caltrans and the Federal Highway Administration, something the company does not appear to have secured. Nor was Apex supposed to allow the storage of inoperable vehicles, flammable materials or other hazards.
Photos of the lot show a hodgepodge of equipment, vehicles, shipping containers, stacks of cardboard and wood pallets around 15-20 feet high.
For 14 years, Serafin had rented about 10,000 square feet, one of about 11 slots on the parcel that Nowaid sublet to small-business operators, he said, most of them immigrants.
The triangular tract was chaotic, with no clear entrance or address, and with unhoused people living in tents and trailers outside its gates. Graffiti was scrawled around the perimeter. Inside, workers and equipment shared close quarters amid the stacks of pallets.
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Serafin said fires regularly broke out in encampments around the property, but calls to police or for cleanups often went unheeded.
He and others would sometimes pay homeless people $20 just to move away from their businesses.
While Caltrans required Apex to hold $5 million in liability insurance, fire insurance was specifically omitted from the lease agreement, according to a copy of the agreement filed in court.
Most of the businesses didn’t have insurance and lost all of their inventory and equipment.
Interviews with more than half a dozen tenants and court records offer a window into life under the freeway at the edges of downtown Los Angeles, where there was little enforcement and an underground economy flourished.
“We’re living paycheck to paycheck,” said Jose Luis Villamil Rodriguez, 53, who had a mechanic stand under the freeway.
He estimates he lost $100,000 worth of tools, trucks and equipment, including a 1970 GMC Camper he had just fixed for $20,000. He now has to return the first installment of that payment to his client.
“This can’t be true; I hope it isn’t true, but if it is —” he told himself as he drove to the shop on the night of the fire. “I guess I’ll be OK. But I’ve sacrificed so much for it to end up like this?”
Rodriguez, who is Oaxacan, came to the U.S. from Mexico at 19. He worked on cars using a generator for light and a portable air compressor to power his tools. He paid Nowaid’s company $1,450 a month for the space. He had no insurance.
Now it was all in ashes. The concrete columns were cracked and charred.
Gov. Gavin Newsom was promising to “fix the 10.” What Rodriguez wanted was his business back, as did Serafin.
Serafin had hung a colorful sign between two freeway pillars advertising his distribution service that catered to the garment district. Over the years, his business grew, and he was able to support his wife and four children after paying $4,500 a month to one of Nowaid’s companies. He estimates that, collectively, tenants there paid about $23,500 a month.
Rodriguez said the owner was relentless when it came to collecting rents. “I had to pay by the first of the month,” he said. “There was not much wiggle room.”
Alfredo Lara, 54, another tenant, said his rent was $4,000 a month, which was so much that he began subleasing a portion of his space to three other people for $1,000.
Apex, meanwhile, was supposed to be paying Caltrans $6,518 a month to lease the land, a figure that had not changed since about 2015, according to court records. Caltrans began leasing the land to Apex for $5,300 a month in 2008.
After the fire, Serafin said, he got calls from dozens of people checking whether he was OK. He also got a call from Nowaid on Sunday, asking whether the fire was on his property.
Cash Return for State : Caltrans Expands Freeway Airspace Leasing Program
Over quail egg shao mai and steamed duck, guests dining in the Chinese restaurant at the new Mediterranean-style Hotel Los Angeles will gaze out over a familiar sight--the traffic-jammed Hollywood Freeway almost within arm’s reach.
Feb. 24, 1985
“Then he asked if there was an investigation,” Serafin said. “I said yes. Then he hung up.”
Asked about the fire by phone on Monday, Nowaid said he “did not know anything” yet and was consulting with his attorneys.
His lawyer Mainak D’Attaray said he and his client were doing their own investigation of where and how the blaze started.
“It happened so recently that we don’t even know what occurred,” D’Attaray told The Times, later adding in an email that Apex Development “had nothing to do with the fire.”
The relationship between Nowaid and his tenants had long since soured.
In April, court records say, a Caltrans employee visited the lot and told tenants to stop paying their rent to Apex as the state planned to evict the company.
That visit prompted Apex to sue Caltrans in June, accusing the agency of interfering with its businesses, according to court records. Apex also said it had made more than $100,000 in improvements to the property, and that evicting Nowaid’s firm would amount to “unjust enrichment” of Caltrans.
The workers underneath the freeway stopped paying.
“It wasn’t that we didn’t want to pay him,” Serafin said. “We just wanted him to fix it, to pay Caltrans.”
It didn’t work. In June, he said, Nowaid arrived with security in unmarked cars and locked the tall iron rod gates until each of the tenants paid rent.
Nowaid posted a few people at the gates, Serafin said, while the tenants each fetched cashier’s checks from their banks.
“He was trying to get as much money from us as he could,” Serafin said. They continued paying him until October, shortly after state lawyers moved to evict Apex from his five sites.
Several tenants, including Serafin, said they stopped paying Nowaid this month after receiving notice from the court to appear for the lawsuit in December. They said that the moment they stopped paying rent, Nowaid threatened to lock the gates again.
“He sent one of his workers to collect the payment,” said Carina Quinto, who runs a mobile mechanic shop from the underpass. “We told him no, you can’t do that. It’s not legal.”
Normally, she said, he would respond by shutting the gates, but this time nobody ever came to close the doors.
Then came the fire, a little more than a week later.
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Rachel Uranga covers transportation and mobility. Before joining the Los Angeles Times, she was a reporter with the Los Angeles Business Journal, Southern California News Group and Reuters in Mexico City.
Matt Hamilton is a reporter for the Los Angeles Times. He won the 2019 Pulitzer Prize for investigative reporting with colleagues Harriet Ryan and Paul Pringle and was part of the team of reporters that won a Pulitzer Prize for its coverage of the San Bernardino terrorist attack. A graduate of Boston College and the University of Southern California, he joined The Times in 2013.
Ruben Vives is a general assignment reporter for the Los Angeles Times. A native of Guatemala, he got his start in journalism by writing for The Times’ Homicide Report in 2007. He helped uncover the financial corruption in the city of Bell that led to criminal charges against eight city officials. The 2010 investigative series won the Pulitzer Prize for public service and other prestigious awards.
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Moscow Metro Font
Moscow Metro is a multi-line display typeface inspired by the Moscow underground map. It comes in Regular and Color versions.
Moscow Metro is ideal for posters and headlines, neon signage and other artworks.
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Designed by: Nadira Filatova Website
License: free for commercial use.
Category : Moscow Metro
This category has the following 18 subcategories, out of 18 total.
- Quality images of Moscow Metro (87 F)
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- Infrastructure of Moscow Metro (32 C, 136 F)
- Lines of Moscow Metro (22 C)
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Media in category "Moscow Metro"
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- Metro de Moscú 1.webm 32 s, 1,920 × 1,080; 12.26 MB
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