LEASE AGREEMENT REFERENCE GUIDE 880: AGGRESSIVE ASSIGNMENT STRATEGIES $49.95
AGGRESSIVE LEASE ASSIGNMENT STRATEGIES
An Assignor's Thoughts About Getting Off the Post-Transfer Hook
Well drafted pro-landlord assignment and sublease clauses almost always provide that an assigning tenant remains liable for performance under the lease after the assignment. That is because, as a matter of hornbook law, a party can assign the benefits but not the burdens of a contract to a third party. Although the landlord will look primarily to the assignee to perform the tenant's obligations after the assignment, if the assignee defaults, the landlord can, and no doubt will, pursue the assignor and the assignee with equal vigor. Without an express release from the landlord, the assigning tenant is in the same position as a guarantor of the assignee's performance.
Depending upon the circumstances after the assignment, the role of guarantor might not be that appealing for the assignor. If the amount of rent payable under the lease is substantial, and the length of term which remains is considerable, the assigning tenant will wish it had paid more attention to the concept of release following assignment when the original lease was negotiated.
Because the time of the assignment is the worst time to bring up the idea of the release of the assigning tenant with the landlord. Negotiating the three party assignment agreement is difficult enough as it is (see the Lease Clause Critique below). And, if the lease has a pro-landlord assignment and sublease clause, most of the assigning tenant's energy will go toward just obtaining the landlord's consent for the transfer.
Make It Theoretical
The time for the tenant to negotiate a release provision which operates in the event of an assignment is when the original lease is negotiated. This is especially true if the lease contains no convenience termination provisions which permit the tenant to terminated the lease. During the initial negotiations of the lease, the tenant is free to make post-assignment release one of many issues on the table with regard to the assignment clause in the landlord's form lease.
No real life assignee is waiting in the wings for the landlord's approval; the discussions about release can be framed around "what conditions would have to be present for the tenant to be released following a transfer?" And if it isn't possible for the tenant to negotiate a complete post-transfer release, what about a partial or conditional release?