difference between sublease and lease assignment

What is Assignment of Lease and How It Differs from Subletting

The assignment of lease (and rent) is a foggy topic that is often confused with subletting. Let's clear the air once and all right now. Learn the differences between a lease assignment and sublease so you can make the right choice.

What is Assignment of Lease? - The Important Basics

Let's begin by introducing the 3 players in a lease assignment - The landlord, the original tenant (assignor) and the new tenant (assignee). The original tenant has an unexpired lease agreement with the landlord and he wants out. Since the original tenant can't just break the agreement and walk off, what he does is to get a new tenant to swap places... and take over all his rights and obligations for the remainder of the lease period. So if the original tenant signs a 1 year commercial lease and the business goes bust after 8 months, the new tenant will be assigned a 4-month commercial lease (with the same terms and conditions as the original agreement). Now here's the big catch: Even though the original tenant has handed over all his duties and obligations to the new tenant, he is not off the hook... unless the landlord agrees to release him from all liabilities. If the new tenant stirs up trouble, our dear original tenant will find himself in hot soup as well. Of course, whether the original tenant is allowed to pull this assignment trick out of his hat is a whole new matter. Knowing for sure is actually simpler than most people think: First, examine your local landlord tenant laws for any lease assignment rules. Most of the time, landlords are given the right to allow or disallow assignments but once in a while, the local law let tenants have the final say instead. If there's no mention of lease assignments in your law text, then your rental lease agreement shall dictate the terms.

Difference Between Lease Assignment and Subletting

When it comes to subletting vs assignment of lease, there's often a massive mix-up. Sometimes even real estate professional get it wrong by assuming them to be one and same thing. However if you dig deeper, you will find that the differences are not just numerous, but important as well. Let's begin by dragging the landlord into the picture. An assignment of lease launches the new tenant into a direct relationship with the landlord - The landlord collects rent straight from the new tenant and deals with the new tenant directly on all lease issues. So in this case, the original tenant gets to take back seat and doesn't have to manage the new tenant actively. On the other hand, there's no direct relationship between the landlord and new tenant (subtenant) in a sublease. Instead the original tenant plays mother goose and is responsible for collecting rent from the subtenant and making sure that he's following the lease rules. When you compare the two, a sublease is a lot more hands-on for the original tenant. No matter which path you take, you will still want a good new tenant who pays the rent on time and follows the lease rules to the agreement. For the golden rules on screening tenants and running credit checks, Click here for our guide to running tenant credit checks. When you have a lease assignment, the terms and conditions of the lease remains largely unchanged - It's almost like taking the original lease agreement and swapping the tenant's name with another. With a sublease, there's more breathing space - The original tenant can decide how much rent to charge, how long the subtenant is going to stay or even collect security deposit... as long as it stays within the boundaries drawn by the original lease agreement between the landlord and original tenant.

Should You Choose Assignment of Lease or Sublease?

You are the Landlord - A lease assignment is recommended in most cases. You will have more control over your new tenant (instead of leaving matters in the original tenant's hands and hoping that he would do a good job)... plus you still have the original tenant to cover your back in case anything goes wrong. You are the Original Tenant - Now this is a tricky one. If you want to someone to take over the entire lease and property for its remaining duration (e.g. your business goes belly-up and you no longer need the office), then help yourself to a lease assignment. If the landlord's consent is required for assignment (and he doesn't give the nod), you can always try offering him a lease assignment fee as a deal sweetener. However, if you are looking for someone to share the place (and rent)... or perhaps you need someone to cover the rent while you are overseas for a few short months, then a sublease would be ideal. You are the New Tenant - An assignment of lease works better for you most of the time. You won't be at the mercy of the original tenant (for example if he screws up and the landlord terminates the original lease agreement, your sublease might also go up in flames). But if you only want to rent part of the property... or don't want to tie yourself down for the remaining lease duration, then you are better off sticking to a sublease. Now that we have covered the topic of assignment vs sublease, go ahead and take your pick - Click here for an assignment of lease form or Click here for a sublet agreement instead.

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What is the Difference Between Sub-letting and Assigning a Lease?

If a tenant wants to leave their premises before the vacation date specified in their lease agreement, they can assign (i.e. transfer) or sub-let the shopfront.

By assigning or sub-letting the lease to a third party, tenants can leave the property without breaking the terms of their lease or paying two sets of rent. Assignment and subletting appear similar as they both rely on a third party taking over premises. But there are some key differences between the two.

We set these out below to help tenants decide which is better suited to their needs.

When is a Sub-let Used Instead of an Assignment?

A sub-let is when an existing tenant leases out all or part of their premises to a third party. However, the original tenant is still liable under the lease. You can read more about subleasing in our article, ‘ I’m Sub-letting a Property. What Do I Need to Know? ‘

An assignment, on the other hand, is when a tenant transfers their lease to someone else. The tenant is then no longer responsible under the original lease from the assignment date. Tenants more commonly assign the property when selling the business and sublease when the business has additional space they want to lease out. Importantly, a tenant requires the consent of the landlord to assign or sublet the property.

Should I Sub-let or Assign My Lease?

The answer depends on the circumstances of the parties’ transaction. For instance, a tenant may choose to sub-let if they are simply looking to rent out additional space to recoup costs or increase profit margins but want to remain as a tenant.

If, however, a tenant wants to end the lease early and vacate their business’ premises entirely, an assignment is likely a preferable option. An assignment transfers the obligations under the original lease to the new tenant (the assignee), placing them in the shoes of the old tenant. Both parties usually enter into a transfer of lease and deed of consent to assign the lease with the landlord and each other.

Sub-letting also creates a new series of obligations for head-tenants who act, essentially, as landlords. The head-tenant will require the sub-tenant to indemnify the tenant and landlord for their use of the property. Parties will effect this by entering into a formal sub-let with the landlord’s consent.

Key Takeaways

Assigning a lease and sub-letting are two options for tenants wanting to leave the premises before their lease ends.

Sub-letting involves a tenant leasing out all or part of their premises to a third party. Under a sub-letting agreement, the rights and obligations created under the initial lease remain in force.

An assignment involves transferring the lease from one party to another. After the assignment date, a tenant’s rights and obligations no longer exist. Tenants looking to vacate their premises entirely should, where possible, assign their lease as it gives rise to fewer liabilities and duties.

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Assignment vs Subletting - What is the difference?

Assignment vs subletting – what are the differences.

Assigning a residential lease agreement and subletting are two distinct ways of transferring tenancy rights in a rental property, each involving different legal and practical implications. Here’s a breakdown of their differences:

Assignment of a Residential Lease Agreement:

Definition:

Transfer of Responsibility: Assigning a lease involves transfer of the original tenant’s entire interest in the lease to a new tenant. The original tenant ceases to have any rights or obligations related to the property.

Consent from Landlord: Typically requires the landlord's explicit permission or consent. The landlord is often involved in vetting and approving the new tenant.

Replacement Tenant: The original tenant may find a replacement (assignee) who takes over the lease entirely. The landlord may also market for a new tenant and vet any potential replacement tenants.

Legal Responsibility:

Liability: The assignor (original tenant) is usually released from all liabilities and obligations once the lease is assigned to the new tenant.  This may key off of the new tenant taking possession of the rental unit.

Direct Relationship with Landlord: The new tenant (assignee) becomes directly responsible to the landlord for rent payments, property maintenance, and adherence to lease terms by effectively “stepping into the shoes” of the departing tenant.

Implications:

End of Original Tenancy: For the assignor, once the lease is assigned, their association with the property generally ends. They may not have recourse if the assignee defaults on payments or breaches the lease.

Subletting of a Residential Lease Agreement:

Partial Transfer: Subletting occurs when the original tenant rents out all or part of the property to a subtenant while retaining some rights and responsibilities under the original lease.

Consent from Landlord: Usually requires the landlord's permission, as outlined in the lease agreement. Some leases explicitly prohibit subletting.

Ongoing Relationship with Landlord: The original tenant (sublessor) maintains responsibility to the landlord for lease obligations.

Obligations: The sublessor remains responsible for rent payments and adherence to lease terms, acting as an intermediary between the landlord and subtenant.

Relationship with Subtenant: The sublessee has a legal relationship with the sublessor rather than the landlord. The sublessee must adhere to terms agreed upon in the sublease.

Ongoing Responsibility: The original tenant (sublessor) remains liable to the landlord for the property and its condition. They're responsible for any damages or lease violations caused by the sublessee.

Continued Tenancy: The original tenant maintains an ongoing relationship with the property and the landlord.

How Much Would Your Home Rent For?

Key Differences: 

• Transfer of Responsibility:  Assigning a lease completely transfers the tenant's interest to a new tenant, while subletting involves the original tenant retaining some rights and responsibilities.
• Direct Relationship : In assignment, the new tenant has a direct relationship with the landlord, whereas in subletting, the original tenant maintains this relationship. 
• Liability and Obligations:  Assigning a lease typically releases the original tenant from obligations, while subletting keeps them responsible for the property.

Both assignment and subletting can offer flexibility to tenants but come with distinct legal and practical implications that tenants and landlords should carefully consider before proceeding. Understanding these differences helps individuals choose the appropriate option based on their circumstances and lease agreement terms.

In most cases, assignment is the best course as it avoids the main pitfall of subletting, namely that the subletting tenant has no direct relationship or responsibility to the landlord/owner of the rental unit.  For that reason, professional property managers normally recommend termination of the original lease and negotiation of a new lease with the replacement tenant.  The outgoing tenant will normally absorb some of the costs associated with securing a replacement and the property manager makes sure the turnover is handled property.  Having experience when these issues arise is important to protect the landlord’s interests.  If you need management of an investment property, call one of our managers today to learn why so many landlords believe TREG is the RIGHT CHOICE for property management.

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Assignment of Lease: How It Works and Parties Involved

Jump to section, what is an assignment of lease.

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

You can view an example of a lease assignment here .

How Lease Assignment Works

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

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

Difference Between Assignment of Lease and Subletting

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

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

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

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

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

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

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

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

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

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

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

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

Get Help with an Assignment of Lease

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

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

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I am a seasoned corporate transactional attorney with over 20 years of combined outside and inside General Counsel experience. My experience includes helping companies of all sizes, including start-ups with general corporate matters and commercial transactions.

Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.

Retired Dentist transitioned to Law, with a special interest in Commercial Real Estate, Startup businesses, Asset Purchase Agreements, and Employment Contracts. I love to help dentists and physicians with legal issues pertaining to licensing, credentialing, employment, and general business-legal questions.

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Attorney creating plans and strategies to help individuals create, build, protect and pass on wealth.

Jim Slattery most recently served as General Counsel at Regional News Network, a large owner of broadcast television stations. Jim is an experienced attorney with broad-based expertise. He is a seasoned negotiator who has been involved in negotiations as complex as the Olympic Games. Jim spent 18 years as Vice President for Business and Legal Affairs at NBCUniversal. Previously, Jim worked in the media industry in various roles at All American Television. Jim’s success can be attributed to his ability to properly analyze data, manage projects, lead teams, develop creative solutions for complex problems, focus on strategically optimizing assets, manage/allocate risk and collaborate with divergent constituent groups to achieve objectives. Jim received a J.D. and a B.B.A. from the University of Notre Dame.

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Assignment of Lease

Contract to lease land from a church?

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

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

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Assignment, Subleasing, And Why It's Important To Negotiate The Right To Do Both

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In the market for commercial space? Chances are you’re focusing your efforts on sourcing a property that suits your current business requirements.

However, in today’s ever-changing economy/business climate, companies often need to upsize or downsize at short notice.

As a tenant, where does that leave you when locked into a long-term commercial lease?

Keep it flexible

It’s hard to anticipate whether you’ll be faced with breaking a lease before it happens. So, it’s important to keep your contract flexible by negotiating a subleasing and assignment clause into your agreement. This means you’ll be able to transfer all or part of your space to another tenant down the track if the situation calls for it.

What’s the difference between an assignment and a sublease?

Lease assignments and subleases are often viewed in a similar light. This is because both bank on a third party taking over a commercial lease. But, there are some important differences to consider:

Lease assignment

A lease assignment is when an entire property/space, including the existing tenant’s rights and interest in the commercial lease, is transferred over to a new party.

When it comes to leasing assignments, the new tenant takes on the rights and responsibilities of the assigning tenant. That means the original tenant is not liable anymore if the new tenant breaches the lease.

Lease assignment is best undertaken when:

• The whole lease can be disposed of
• The current lease has favourable terms that would be accepted by another tenant

Major hurdles when it comes to lease assignment:

• Requires upfront capital incentive
• Requires landlord consent

A sublease, on the other hand, is a separate contract between the original tenant and a subtenant. Unlike an assignment, a sublease only turns over part of a property. That means that the original tenant shares the rights and responsibilities to the premises.

A sublease may be preferable for tenants who wish to lease out part of their property to another company for the remainder of the lease term. It may also suit if a tenant needs to rent out the entire property for a period within their fixed-term lease.

In this case, the sublessee treats the sublessor as their landlord. In turn, the sublessor assumes liability on behalf of the sublessee.

Subleasing is best undertaken when:

• You're looking for a partial or temporary cost saving initiative
• Your landlord does not consent to or permit assignment
• Your current lease has. onerous clauses that another tenant wouldn’t agree to

Major hurdles when it comes to subleasing:

• Inherent security risks
• You’ll likely recuperate less than 50%-70% of the rent

You can learn more about some of the benefits of commercial subleasing here and what commercial sublessors should expect from subleasing here .

The importance of a lease assignment and sublease clause

The right to assign or sublet a premises comes down to the language used in the commercial leasing agreement.

If there is no prohibiting or limiting clause, a tenant does not need the landlord’s permission to do so. However, if the contract contains such provisions, the existing tenant needs to get the landlord’s consent. This can prove quite costly for the tenant, who may have to continue to pay rent even if they no longer occupy the premises.

Other options for breaking a commercial lease

The odds usually aren’t stacked in the tenant’s favour when it comes to breaking a commercial lease . However, if you used a tenant representation specialist before signing your contract, you should have received the right advice to protect yourself.

Break clause

Well negotiated leases may have a ‘break clause’, however, most landlords are reluctant to include one of these. A break clause basically lays out the circumstances and the manner in which a tenant can break a commercial lease early.

As with any contract, it’s up to the two parties to negotiate terms. One option may be to allow early termination of a lease if a new tenant with similar financial security takes over. This is similar to an assignment. However, the new tenant would take over the full liability of the remaining lease.

Pay out the commercial lease term

Not a desirable option for most tenants, however, there may be situations where it is the only choice. For example, if you were closing your business before the expiry of your lease term and there was no way to arrange an assignment or sublease, paying out the remainder of your term may be the only course of action.

Most people would consider this a worst-case scenario. This, again, highlights the importance of seeking the help of a tenant representation specialist prior to signing any commercial lease .

Commercial tenants should try to mitigate their risks upfront. Before signing a lease, or even at the heads of agreement stage , we suggest negotiating a clause which requires a landlord to act reasonably in the case of lease assignment or sublease.

Work with a commercial tenant advocate

Negotiating commercial lease terms can be tricky (even daunting at times). This is because most businesses only have to do it once every 5-10 years. Being able to negotiate provisions that would not otherwise be included may also prove challenging because landlords prefer not to limit their options.

Luckily, an experienced tenant representative will guide you through the lease negotiation process so your needs are met every step of the way. So, the next time you face a lease negotiation, let Tenant CS balance the playing field.

Considering breaking your lease? Whether you're exploring options like subleasing, assigning, or surrendering, a detailed property strategy is crucial.

Consulting with a tenant representation specialist is your best move, especially if there's less than a year remaining on your lease. At Tenant CS, we exclusively represent tenants, not landlords. Whether you need assistance with subleasing, exiting your lease, finding and negotiating a new lease, or undertaking a mid-lease rent review, appointing us can potentially save you hundreds of thousands of dollars over your lease term while protecting your interests.

Book a call with us today to discover how we can help you effectively negotiate your next lease or exit your current lease early !

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What is the Difference Between an Assignment and a Sublease?

by Pam Pester | Sep 17, 2019

Commercial real estate clients frequently ask how an assignment of a lease differs from a sublease.  The difference is primarily a legal one, although each achieves a similar practical result.

Assignment .  An assignment of a real estate lease is a complete transfer of the right to be the tenant under the lease.  The third-party assignee becomes the “tenant” under the lease, taking over all of the leased premises, and is substituted for the old tenant. The new commerial real estate tenant pays the rent required under the lease directly to the landlord and is treated as the tenant under the lease for all purposes.  However, the catch is that the assignor tenant, unless released from liability by the landlord, remains liable for the obligations under the lease if the new tenant defaults. The old tenant can be sued by the landlord for back rent and other obligations imposed by the lease if the new tenant fails to pay or perform as required by the lease.  Given that a commercial real estate tenant who assigns a lease remains liable for the default of the new tenant, tenants should try to negotiate an automatic release provision.  Unfortunately, many landlords are unwilling to make this concession. An alternative strategy is to ask the landlord for a release if the proposed new tenant is of similar financial strength and creditworthiness.

Sublease. A sublease is a new lease agreement between the real estate tenant as sublessor and a third party as sublessee for all or a portion of the leased premises. The original commercial real estate lease between the tenant and the landlord remains in place, unaffected by the sublease. This means that the tenant remains liable for monthly rent under the original lease, while collecting rent from the subtenant under the sublease, which may be more, less or the same as the rent due under the main lease.

A sublease can be for less than all of the leased premises, while an assignment that transfers the entire lease must be for all of the premises. A sublease is a more involved transaction, as it requires a full sublease document between the commercial tenant as sublessor and the sublessee.

Reasonable Consent .  The landlord must be reasonable in consenting to the proposed assignment or sublease. Under Florida law a landlord cannot be unreasonable or arbitrary in withholding consent to an assignment or sublease. Nonetheless, it is still better to state in the text of the lease that the landlord will be reasonable.

In drafting an assignment or sublease clause, the tenant’s goal is flexibility. Being able to assign or sublet excess space with minimal interference from the landlord and minimal liability in the event the new tenant defaults can be a tremendous benefit to the tenant as the business climate changes from year to year.

When you need assistance with your commercial  lease in Tampa, FL and surrounding areas contact Pam Pester, Owner and President of Mobiliti CRE.  Mobiliti CRE is an independently owned commercial real estate company specializing in exclusive tenant and buyer representation.

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The Difference Between Leases and Subleases

• Apartment Hunting
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What is a sublease, and why should you get one?

Subleases can provide you with a place to live without anchoring you to an extended lease.

For those who are moving without a job or who can’t  find an apartment in a new city , subleases can be extremely helpful.  Subleases usually have a discounted rate and come furnished, making transitions to new cities cheaper and easier.

However, what exactly are they?

What Is a Lease?

A lease is a contract between a landlord (lessor) and renter (lessee). For apartment leases, the landlord is often an apartment complex or a rental agency.

In the lease, the renter agrees to pay the landlord to live in the property for a specified amount of time, usually a year, though this can vary.

What Is a Sublease?

A sublease is created when the renter decides to rent out the apartment he or she is already renting. For example, if you rent your apartment to another person, you’d be creating a sublease.

Subleases are good for renters who are going on extended vacations or otherwise won’t be staying in the apartment they are renting. By subleasing, they can essentially have someone else pay their rent.

A sublease, then, is a contract between an original renter (sublessor) and a new renter (sublessee).  The new renter agrees to pay the original renter a certain amount of money to live in the place for a specified amount of time, usually a couple months.

Learn what terms to include in your sublease .

What About the Landlord?

The landlord still owns the apartment during a sublease. The original renter still owes the landlord rent, but the original renter can use the money he or she makes from the sublease to pay that rent.

Importantly, the new renter and the landlord are not in a contractual relationship. So, if the rent is not paid , the landlord cannot sue the new renter for the rent.  The landlord can only sue the original renter, who can then sue the new renter.

That being said, the landlord can kick out the new renter if rent isn’t paid. So, if the new renter pays the original renter, who fails to pay the landlord, the new renter might still find himself getting evicted.

What to Watch for When Subleasing

There are some common problems when it comes to subleasing. You should address these issues before signing a contract to sublet a place:

• Restrictions in the original lease –  The original lease might prohibit subleases.  Get a copy of the original lease and make sure that you or the original renter has authority to sublease.  Otherwise, the landlord can evict everybody.
• Written contract –  Come up with a contract in writing establishing the length of the sublease, the rent, the time rent is to be paid, and each party’s rights and obligations (i.e. can the new renter use the grill?).
• Paying rent to the landlord –  If at all possible, the new renter should pay  rent directly to the owner/lessor to make sure that rent is being paid.  If that’s not an option, make sure to get receipts from the sublessor proving that they are paying rent in a timely fashion.

Common Differences Between Leases and Subleases:

Leases and subleases come in many shapes and sizes, so to speak.  However, there are some common differences between them.

• Duration : usually a full year, though three-month, six-month, nine-month, fifteen-month and two-year leases exist
• Price : can be a good or bad deal, depending on the location and type of place
• Furnished : occasionally
• Rent : usually monthly
• One month notice of moving out : some leases will end on a specified date, others roll over, requiring one month notice of intent to move out
• Duration : less than full lease, usually between one and six months.
• Price : often cheaper than the rental price in the original lease because the sublessor is desperate to find someone
• Furnished : almost always, though it is the sublessor’s stuff.
• Rent : sometimes paid entirely up front, other times on a monthly basis
• One month notice of moving out : usually not necessary because the sublease has a finite term ending when the renter moves back in.

If you don’t think a sublease is right for you, look into getting a month-to-month lease .

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• Lease Assignment and Sublease

Assignment of Lease (Lease Transfer) vs. Sublease

by emre · Published October 4, 2014 · Updated October 12, 2014

The lease transfer (assignment of lease) is a foggy topic that is often confused with subletting. Let’s clear the air once and all right now.

What is Assignment of Lease? There are  the 3 players in a lease assignment: the landlord, the original tenant (assignor) and the new tenant (assignee).The original tenant has an unexpired lease agreement with the landlord and (s)he wants out. Since the original tenant can’t just break the agreement and walk away, what (s)he does is to get a new tenant to swap places… and take over all his/her rights and obligations for the remainder of the lease period.

So if the original tenant signs a 12-month lease and the tenant has to leave town or finds a better place after 8 months, the new tenant will be assigned a 4-month ease (with the same terms and conditions as the original agreement). Now here’s the big catch: Even though the original tenant has handed over all his duties and obligations to the new tenant, (s)he is not off the hook… unless the landlord agrees to release him/her from all liabilities. If the new tenant stirs up trouble, the original tenant will find himself/herself in hot soup as well. Of course, whether the original tenant is allowed to pull this assignment trick out of his hat is a whole new matter. Knowing for sure is actually simpler than most people think: First, examine your local landlord tenant laws for any lease assignment rules. Most of the time, landlords are given the right to allow or disallow assignments but once in a while, the local law let tenants have the final say instead. If there’s no mention of lease assignments in your law text, then your rental lease agreement shall dictate the terms.

Differences Between Lease Assignment and Subletting

When it comes to subletting vs. assignment of lease, there’s often a massive mix-up. Sometimes even real estate professional get it wrong by assuming them to be one and same thing. However if you dig deeper, you will find that the differences are not just numerous, but important as well.

Let’s begin by dragging the landlord into the picture. An assignment of lease launches the new tenant into a direct relationship with the landlord – The landlord collects rent straight from the new tenant and deals with the new tenant directly on all lease issues. So in this case, the original tenant gets to take back seat and doesn’t have to manage the new tenant actively.

On the other hand, there’s no direct relationship between the landlord and new tenant (subtenant) in a sublease. Instead the original tenant plays mother goose and is responsible for collecting rent from the subtenant and making sure that he’s following the lease rules. When you compare the two, a sublease is a lot more hands-on for the original tenant.

No matter which path you take, you will still want a good new tenant who pays the rent on time and follows the lease rules to the agreement. For the golden rules on screening tenants and running credit checks. When you have a lease assignment, the terms and conditions of the lease remains largely unchanged – It’s almost like taking the original lease agreement and swapping the tenant’s name with another.

With a sublease, there’s more breathing space – The original tenant can decide how much rent to charge, how long the subtenant is going to stay or even collect security deposit… as long as it stays within the boundaries drawn by the original lease agreement between the landlord and original tenant.

Should You Choose Assignment of Lease or Sublease?

You are the landlord – A lease assignment is recommended in most cases. You will have more control over your new tenant (instead of leaving matters in the original tenant’s hands and hoping that he would do a good job)… plus you still have the original tenant to cover your back in case anything goes wrong.

You are the Original Tenant – Now this is a tricky one. If you want to someone to take over the entire lease and property for its remaining duration , then help yourself to a lease assignment. If the landlord’s consent is required for assignment (and he doesn’t give the nod), you can always try offering him a lease assignment fee as a deal sweetener.However, if you are looking for someone to share the place (and rent)… or perhaps you need someone to cover the rent while you are overseas for a few short months, then a sublease would be ideal.

You are the New Tenant – An assignment of lease works better for you most of the time. You won’t be at the mercy of the original tenant (for example if (s)he screws up and the landlord terminates the original lease agreement, your sublease might also go up in flames).

Please fell free to contact us if you have additional questions.

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Assignment vs. Sublease: Difference and Comparison

Difference Between Assignment and Sublease

Assignment vs. Sublease Comparison Chart

Connection to landlord, typical permissions, assignment vs. sublease definitions, ◉ assignment.

Assignment vs. Sublease Frequently Asked Questions

Who typically initiates an assignment, can a sublease extend beyond the original lease's term, is it easier to reverse an assignment or a sublease, can a subleased space be further subleased, who does the landlord hold accountable in a sublease scenario, is rent typically the same in a sublease, can an assignment be partial, what happens to the original lease during an assignment, are there risks to subleasing, do all leases allow for assignments and subleases.

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Apr 07, 2021

The differences between assignment and sublease.

By Don Catalano

An assignment is the transfer of the commercial tenant’s entire responsibilities in a lease. When a corporate tenant assigns its lease, the assignee takes over the tenant’s responsibilities under the lease and communicates directly with the landlord.

When a tenant decides to assign a lease, all his rights and responsibilities in the original lease agreement are released to the third-party assignee. Hence, the original tenant (the "assignor") will have to leave the unit and allow the new tenant to take over all of the leased building.

It is important to check the clauses in the original lease agreement before committing an assignment arrangement. In some leases, the original tenant will remain responsible for the terms of the lease, especially if the new tenant defaults on the lease agreement or causes damage to the property. You may want to check your lease agreement for the option to pursue a permanent assignment so you won't be responsible for expenses or damages.

When a corporate tenant subleases an office , the tenant is transferring all or a portion of the premises for less than the entire term of the lease. Subletting is when a corporate tenant gives another tenant the right to occupy a portion of the entire rental unit for a specific period.

Corporate tenants often sublease when market rents have fallen and parties needing space typically sublease to get space already built-out at a much lower rate than they could as a direct tenant.

Do Both Options Need a Landlord’s Consent?

Both subletting and assigning a commercial lease require the permission of the landlord or a representing agent; this is often expressly indicated in the lease agreement itself. Although most state laws prohibit landlords from withholding consent unreasonably. If the landlord objects to the sublet or assignment, then they must do so on reasonable grounds.

In the case of assignment, a vetting procedure which usually includes credit checks may be completed before formalizing the arrangement with the associated documentation.

Is Subletting or Assignment Right For My Company?

Whether to sublet your commercial property or assign a commercial lease depends entirely on your business situation. By subletting unused space, tenants can recover vital running costs and even improve the viability of their own business. Also, the original tenant remains the tenant and is responsible for all clauses in the original lease.

Assigning your commercial lease to a third party is a good option if you want to terminate your tenancy before the end of your agreement and vacate the premises completely. This is often a good idea if you are planning to sell or relocate your business . With an assignment, you will be absolved of all responsibilities as the original tenant from the date of assignment.

Here are a few other articles to check out:

8 working from home tips you should know, 4 site selection tips when looking for office space, 5 tips when moving your office from big cities to the suburbs, subscribe for more great cre tips hbspt.cta._relativeurls=true;hbspt.cta.load(121314, 'cd3ad71f-75e1-4533-9c5a-8e82767e7aba', {"usenewloader":"true","region":"na1"});.

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What Is a Sublease?

How a sublease works, subleasing and state laws, sublease vs. standard lease.

• Risks (Original Tenant)
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Example of a Sublease

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A sublease is the re-renting of property by an existing tenant to a new third party for a portion of the tenant’s existing lease contract. The sublease agreement may also be called a sublet.

Subleasing may or may not be permitted in the terms of the original lease, and may be subject to additional restrictions by jurisdiction. Even if a sublease is permitted, the original tenant is still liable for the obligations stated in the lease agreement, such as the payment of rent each month.

Key Takeaways

• A sublease is the legal transfer of tenancy from an existing tenant to a third party for a specified period.
• The owner of the real estate must typically approve any subletting arrangement offered by the first tenant, subject to local laws and regulations.
• If a tenant decides to sublease, they remain responsible for rent payments and other contractual obligations.

A lease is a contract between a property owner and a tenant that transfers the owner’s rights to the exclusive possession and use of the real estate property to the tenant for an agreed-upon period. The lease states the length of time the contract is to run and the amount of the tenant’s rent. In legal terms, the tenant’s legal right to possess the property is deemed tenancy. Subleasing occurs when the tenant transfers a part of their legal tenancy to a third party as a new tenant.

Subleasing can be established unless the original lease forbids it. However, in most cases, the owner must be notified and must approve any subletting arrangement created by the tenant. Control over the subletting process could be written into the original lease so that the owner has some control over who uses and/or occupies their property.

A tenant who sublets property must understand that subleasing does not release them from their obligations on the original contracted lease. The tenant is responsible for paying rent and for repairs or damage to the property. That means that if a new subtenant does not pay rent for three months, the original tenant that subleased the property is liable to the landlord for the overdue rent amount and any late fees . In turn, the subtenant is liable to the original tenant for the unpaid rent.

The laws of many states and local municipalities affect a tenant’s right to sublease. These laws may allow an individual to sublease under certain conditions even if their contract with the landlord forbids it. For example, in New York City, a tenant who lives in a building with four or more units has the right to sublease, as long as the landlord consents—or if they deny the sublet on unreasonable grounds, Any lease provision restricting a tenant’s right to sublease is void as a matter of public policy.

In San Francisco, a tenant can replace a roommate with another, even when prohibited by a written lease, as long as the replacement meets the landlord's application screening standards. For example, a landlord might demand a certain credit score where a tenant is concerned. Subleases can apply to both residential and commercial properties.

When subleasing, it's standard for only the original tenant's name to be on the lease—even if the sublessee pays the landlord directly.

A sublease differs from a standard lease primarily in the parties involved and the structure of the agreement. In a standard lease, the lease agreement is directly between the landlord and the tenant, establishing the tenant as the primary occupant responsible for rent and adhering to the lease terms. In a sublease,, there are three parties: the landlord, the original tenant (sublessor), and a new tenant (sublessee). The original tenant remains responsible to the landlord, while the sublessee pays rent to the sublessor and occupies the property under the terms agreed upon in the sublease.

Another key difference lies in the responsibilities and liabilities. In a standard lease, the tenant has direct obligations to the landlord including paying rent, maintaining the property, and complying with lease terms. In a sublease, the original tenant retains these responsibilities to the landlord, even after subletting the property. This can create a layered relationship where the sublessor must ensure that both they and the sublessee fulfill their respective obligations.

Last, the duration and flexibility of the agreements differ. A standard lease typically runs for a fixed term agreed upon by the landlord and tenant, with renewal options specified in the contract. A sublease, however, is often more flexible, potentially aligning with the remainder of the original lease or being arranged for a shorter period. The sublease agreement may also include specific clauses that differ from the original lease depending on the sublessor's needs.

Risks of Subletting for Original Tenant

Subletting can expose the original tenant to several risks, the most significant being financial liability. When a tenant sublets their rental property, they remain legally responsible for the terms of the original lease including the payment of rent. If the subtenant fails to pay rent on time or at all, the original tenant must still cover the shortfall. This financial responsibility extends to any damage caused by the subtenant.

Another risk involves the potential for legal complications. Many leases require the landlord's explicit permission to sublet, and failing to obtain this permission can lead to serious consequences including eviction . Even if subletting is allowed, the original tenant must ensure that the sublease agreement complies with local laws and the terms of the original lease.

The quality of the subtenant is another critical risk factor. If the original tenant does not carefully vet the subtenant, they may end up with someone unreliable or disruptive. A problematic subtenant could cause issues with neighbors, fail to take care of the property, or violate lease terms. Though the financial terms were discussed above, this may also lead to non-financial complications.

Lastly, subletting can complicate the original tenant's ability to return to the rental property. If the subtenant refuses to leave at the end of the sublease, the original tenant may have to engage in costly and time-consuming eviction proceedings. That is because, at the end of the original tenant's lease, the subtenant must leave the premises as the original tenant no longer has a claim on the property through the original lease.

In theory, subleases are limitless. For example, someone who is subleasing a property could in turn lease that property to someone else, and so on. Again, this is all dependent on the conditions on each lease/sublease.

Risks of Subletting for Subtenant

Subletting also poses several risks for the subtenant, starting with the potential lack of legal protection. Since the subtenant does not have a direct contractual relationship with the landlord, their rights are limited compared to those of the original tenant. If the original tenant violates the terms of the primary lease, the subtenant could find themselves unexpectedly evicted, even if they have been fully compliant with their sublease agreement.

Another significant risk involves the possibility of unexpected lease termination. If the original tenant decides to end their lease early or is evicted by the landlord, the subtenant may be forced to leave the property with little notice.

The condition of the rental property is another area of concern for the subtenant. Since the subtenant typically does not conduct the initial walk-through with the landlord, they may not be fully aware of the property’s existing condition or any outstanding maintenance issues . If the landlord refuses to address these problems because the subtenant is not their direct tenant, the subtenant could end up living in substandard conditions with limited recourse.

Because a lease is generally for a predefined term, situations can arise that make it difficult or impossible for the original tenant to complete the lease term. For example, if a tenant is renting an apartment in Chicago with a 12-month lease and, during month four, that tenant receives a job offer in Boston, the tenant may decide to sublease the apartment to another tenant for the remaining eight months. The sublease means that the original tenant can accept the job and move and does not have to pay expensive fees to get out of the lease or pay rent on two apartments.

The landlord also benefits because they receive all 12 rent payments and are saved the expense and effort of finding a replacement tenant. The sublease arrangement also means that the original tenant retains an interest in the apartment. Thus, if the original tenant decides to move back to Chicago, they may be able to renew their lease on their old apartment.

What Is Subletting?

Subletting occurs when a tenant, who has a lease agreement with a landlord, rents out all or part of their rented property to another person, known as the subtenant. The original tenant, or sublessor, remains responsible for the lease with the landlord, while the subtenant occupies the property and pays rent to the sublessor under the terms of a separate sublease agreement.

Do I Need Permission From My Landlord to Sublet?

In many cases, tenants need written permission from their landlord to sublet. Most lease agreements include a clause that outlines the conditions under which subletting is allowed. Check with your landlord if you're not sure.

How Do I Find a Suitable Subtenant?

Many times, people may sublet to people they already know like family or friends. However, you could also take more traditional methods to find a subleasor. Finding a suitable subtenant involves advertising the property, conducting interviews, and thoroughly vetting potential candidates. This process should include background checks, credit checks, and references to ensure the subtenant is reliable, financially stable, and likely to adhere to the sublease terms.

Who Is Responsible for Rent Payment in a Sublease?

In a sublease, the subtenant is responsible for paying rent to the original tenant, who in turn remains responsible for paying rent to the landlord. If the subtenant fails to pay, the original tenant must still fulfill their rent obligations to the landlord.

A sublease is an agreement where an original tenant rents out their leased property to a subtenant, while remaining responsible to the landlord for the terms of the original lease. This arrangement creates a layered relationship, where the subtenant pays rent to the original tenant, but has no direct legal connection with the landlord.

Office of the New York State Attorney General. " Residential Tenants’ Rights Guide ," Pages 26-27.

City and County of San Francisco Rent Board. " Topic No. 151: Subletting and Replacement of Roommates ."

Apartment List. " What is Subletting? Guide to Sublet Apartments ."

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• Sublease and Assignment

Do you know the difference between a sublease and an assignment?  We can help…

The right of possession may be transferred by the tenant to a third person either by sublease or assignment, provided the landlord gives  consent when required. The substance of the transfer, rather than its form, may well determine the parties’ liabilities to the landlord (see below). Thus, when the tenant retains some right of reentry onto the leased premises, the law deems the transfer a sublease. On the other  hand, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, the transfer is an assignment.

Landlord’s Consent Required

Texas Property Code § 91.005 provides that a tenant may not sublease or rent leased premises during the term of the lease without first obtaining the landlord’s consent. The statute has been held to apply to assignments as well as subleases.  Since the statutory prohibition of assignments or subletting is solely for the landlord’s benefit, only the landlord may bring an action for any wrong done as a result of a  sublease or  assignment made without consent. If the original tenant does assign or sublet the lease without the landlord’s consent, the landlord may refuse to accept rent and treat the lease as forfeited.

The statutory prohibition against assigning a lease without the landlord’s consent may be avoided only by a clear expression of such an intent. For example, a lease provision granting the lessee the right to assign the lease without the landlord’s consent when the tenant is mortgaging its interest will not operate as a relinquishment by the landlord of the right to consent to subsequent assignments.

A landlord traditionally has no duty to consent to the proposed assignment of a lease unless such a duty is expressly stated in the lease. However, the Texas Supreme Court’s 1997 decision to impose a duty to mitigate damages on landlords will limit the right to refuse consent in many cases. A lease to a named person and that person’s heirs has been held to amount to an express authorization of either an assignment or a sublease.

A lease may include a provision that the landlord may not unreasonably withhold consent to a sublease or assignment. In that case, the reasonableness of the landlord’s refusal to consent is determined by reference to the terms and conditions of the original lease. It is unreasonable for the landlord to condition consent on a change in the terms and conditions of the original lease based on what the landlord finds economically advantageous at the time of the attempted assignment or sublease.

The landlord’s acceptance of payments with knowledge of a sublease raises a material fact issue as to whether the landlord has waived the right to object to the sublease.

Liabilities of Parties Upon Sublease or Assignment

Even when the landlord consents to an assignment or sublease, the original tenant is not released from the obligations of the original lease. In an assignment situation, the assignee, as well as the original  tenant, is bound by the covenants of the original lease. For instance, when the landlord does not receive rent from the lessee’s  assignees, and the assignees appear to have abandoned the premises, the landlord has the  right to re-let the property. By so doing, the landlord will not abrogate the lease and may recover from the former lessee or the assignees  the amount of  the agreed rent for the entire contract period, less any sum realized from re-letting

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What is the Difference Between Sub-letting and Assigning a Commercial Lease?

As a commercial property tenant, you have a number of options during your tenancy. Sub-letting and assigning a commercial lease are just two of them. Whilst often mentioned in the same breath, the two processes are very different, and tenants should be aware of these variations before taking the step that suits their specific requirements.

As a leading commercial property estate agent serving landlords and tenants in Staffordshire, Cheshire and Shropshire, we help our clients cut through the legal jargon to understand and utilise the solutions that suit them. Here, we shine the spotlight on sub-letting and assignment so you can have a clearer understanding and subsequently rent with confidence.

Related Article: The Benefits of Investing in Commercial Property

Related Article: A How-To on Industrial Leasing

What is sub-letting?

A sub-let is arranged by the existing and original tenant, who (with the landlord’s approval) arranges for all or part of the commercial premises to be let to a third party. Sub-letting unlocks numerous benefits for the tenant, especially if they want to share the cost of renting a property. Even if the tenant chooses to sub-let however, they are still liable under the lease.

Another important difference between a sublease and an assignment relates to the fact that normally the sublease will be contracted outside of the ‘Landlord and Tenant Act 1954’, which removes the ‘security of tenure’ provisions from the sublease. This means that in the event that the head tenant vacates the building or ceases to trade the sub-tenant will lose their right of occupation and will be required to vacate as well. This is understandably slightly precarious from the subtenant’s point of view as the sub-tenant does not have the certainty of being able to remain in occupation indefinitely and, depending on the head tenant’s circumstances, may be required to vacate at short notice.

How is assignment different?

Assigning a commercial lease is the legal transfer of the lease to a third party. With assignment, the original tenant is not liable under the original lease, and responsibility is legally transferred as of the assignment date.

Unlike with sub-letting, when assigning a commercial lease, the original tenant does not share the property with the third party. This option is therefore more commonly used when a tenant has to sell their business and no longer has use for the commercial space they are legally bound to lease for the remaining period of their tenancy.

Do both options need a landlord’s consent?

Both sub-letting and assigning a commercial lease can only be done with the permission of the landlord or representing agent, a fact that will be stipulated in the lease itself. If the landlord objects to the sub-let or assignment, then they must do so on reasonable grounds. They are prohibited by law to withhold consent unreasonably.

When assigning the commercial lease, a vetting procedure (complete with credit checks) will usually be completed prior to formalising the arrangement with the associated documentation.

Is sub-letting or assignment right for me?

Whether to sub-let your commercial property or assign a commercial lease depends entirely on your circumstances. As previously mentioned, sub-letting is beneficial for tenants who have additional space within the commercial premises that they do not use. By sub-letting this unused space, tenants can recoup vital running costs and even improve the viability of their own business. With sub-letting, the original tenant remains the tenant and as ‘head tenant’ you will have various responsibilities.

A head tenant is essentially the landlord of the sub-tenant. The terms and conditions of the sub-let should, therefore, be formalised in writing with the landlord’s permission.

Assigning your commercial lease to a third party is a better option if you wish to terminate your tenancy before your agreement comes to an end and vacate the premises completely. This may be necessary if you have had to sell or relocate your business. With an assignment, you will have no responsibilities as the original tenant from the date of assignment. All obligations as set out in your original tenancy agreement will be transferred to the new tenant or ‘assignee’. To formalise the transfer, all parties must agree and sign a transfer of lease and deed of consent.

Final Words

As you navigate the options of sub-letting or assigning your commercial lease, understanding the distinct differences can empower you to make the right decision for your business. Our team at Rory Mack Associates specialises in guiding landlords and tenants through these complexities, ensuring clarity and confidence in every lease transaction.

For further information about sub-letting and assignment, please contact our dedicated team directly at 01782 715725 . Alternatively, you can email [email protected] to get in touch.

Related Articles

• A How-To on Industrial Leasing
• The Benefits of Investing in Commercial Property

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