performance (a decision that the proposed sublet or assignment is, in fact, valid) and specifically exclude other types of damages (e.g., consequential). For example:
Tenant agrees that if Landlord is found to have unreasonably withheld, conditioned or delayed its consent to as assignment or sublet under this Section ___, Tenant’s sole remedy shall be specific performance such that the proposed assignment or sublease is held to be valid as of the day of such finding. Tenant fully releases Landlord from and waives its right with respect to any other damages, direct or consequential, with respect to Landlord’s consent.
The following Section 1.5 discusses a potential way for the landlord to proactively an Ernst-like holding without resorting to the type of landlord’s sole discretion clause discussed in Section 1.3 above.
1.5The Qualified Reasonable Standard. The landlord can protect itself against the risk of an Ernst-like outcome by qualifying the tenant’s right to sublet or assign with certain objective or landlord-controlled criteria. In fact, the Ernst court recognized that the parties are “free to negotiate the standard by which a landlord’s failure to consent to an assignment will be considered.” Ernst, 80 Wash.2d at 493.
The following are sample criteria that a landlord might require be met it is obligated to reasonably respond to a request to sublet or assign.
The tenant is not then and has not ever been in default.
The proposed transferee meets the landlord’s financial criteria (a potentially important distinction from landlord’s financial criteria at the time of entering into the lease) for creditworthiness.
The proposed transferee’s use does not violate any exclusive use clauses in other leases.
The proposed transferee’s use is consistent with the character of landlord’s building.
The proposed transferee has a proven track record in the proposed use (particularly important with environmentally risky uses like dry cleaning or gas stations).
If properly drafted, such criteria should allow the landlord to evaluate the proposed transferee on specific, critical aspects of its candidacy in an unchallenged, even arbitrary, manner. For several examples of ways to structure this type of clause in varying degrees of protection for the landlord, see Exhibit A.
1.6Transfers of Ownership as an Assignment. The landlord may worry about the tenant using changes in corporate ownership as a method of avoiding the requirements of the sublease and assignment clause under the lease. A tenant could try to avoid a requirement for landlord consent to a transfer by keeping the lease in the tenant’s name but selling the business (e.g., through a sale of stock or partnership interests, or a merger). Also, the landlord may want to make sure that the persons running the company they’ve leased to – who probably happen to own a majority of the stock or partnership interests – remain with the company.