How can tenants negotiate stronger subleasing and assignment rights?

1 Subleasing vs Assignment

Subleasing and assignment are two different ways of transferring your lease interest to another party. When you sublease, you remain the primary tenant and responsible for the lease terms, but you allow a subtenant to occupy part or all of your space and pay you rent. You can sublease for a shorter or longer period than your original lease term, but you cannot sublease beyond your lease expiration date. When you assign, you transfer your entire lease interest and obligations to an assignee, who becomes the new primary tenant and deals directly with the landlord. You can assign your lease at any point during your lease term, but you usually need the landlord's consent and may have to pay a fee.

2 Benefits and Risks

Subleasing and assignment can offer benefits and risks for both tenants and landlords. For tenants, subleasing and assignment can provide flexibility, income, and relief from lease obligations in case of changing business needs, financial difficulties, or relocation. For landlords, subleasing and assignment can ensure continuous occupancy, rent collection, and tenant quality in their properties. However, subleasing and assignment can also pose challenges and liabilities for both parties. For tenants, subleasing and assignment can involve finding and screening suitable subtenants or assignees, negotiating terms and conditions, obtaining landlord's approval, and monitoring performance and compliance. For landlords, subleasing and assignment can affect their control over their properties, their relationship with their tenants, and their exposure to potential disputes and damages.

3 Negotiating Strategies

To negotiate stronger subleasing and assignment rights, tenants need to understand their landlord's perspective, their market conditions, and their leverage points. One strategy tenants can use to improve their chances of obtaining favorable subleasing and assignment rights is requesting them upfront when negotiating the initial lease terms or as early as possible when renewing or extending the lease. Furthermore, tenants should provide the landlord with a compelling reason for subleasing or assigning and offer incentives such as higher rent, longer lease terms, or additional security deposits. Additionally, tenants should seek the landlord's consent in advance for specific subtenants or assignees that meet criteria such as creditworthiness, industry, and use of space. Agreeing to share part of the profits from subleasing or assigning with the landlord can also be beneficial. Finally, tenants should limit the landlord's discretion and grounds for withholding consent while retaining some rights and obligations in the sublease or assignment agreement. Obtaining a release or indemnity from the landlord and subtenant or assignee can help protect tenant interests and limit liability in case of default, breach, or damage. Negotiating these terms can be difficult but by understanding the differences, benefits, and risks of subleasing and assignment, as well as utilizing effective negotiating strategies, tenants can increase their chances of securing stronger subleasing and assignment rights with their landlords.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?