Determining to what extent a tenant shall be allowed to sublease or assign its rights under a lease is one of the most important parts of the lease negotiation. Each transaction must be looked at individually. Factors that will influence the type of assignment or sublease rights provided to the tenant may include the relative strength of the parties, the length of the term, the size of the tenancy, the tenant’s use and the sophistication of the parties.
Some of the issues that the landlord and tenant may wrestle with in negotiating the tenant’s right to sublet or assign include those addressed in the following sections. A number of sample paragraphs that are often included in these clauses are embedded in the following text and are attached to these materials in Exhibits A-G. Samples of entire assignment/subletting clauses (pro-landlord, pro-tenant and neutral) are attached as Exhibit H-J. Remember that each clause should be tailored to your particular transaction.
1.To Whom May Tenant Sublet/Assign its Leasehold Interest?
1.1Lease is silent. If the lease is silent on the issue of whether the tenant may sublet or assign, the default rule is that the Tenant will be allowed to sublet or assign without the landlord’s consent. Cupples v. Level, 54 Wash. 299, 103 P. 430 (1909). Very rarely will a commercial lease be silent on this issue. Rather, almost every lease will provide the landlord with some form of control over a tenant’s right to sublet or assign. If a lease provides that a tenant may sublease or assign, and does not contain any restrictions on such rights, a similar result to the default rule ensues: the tenant may freely assign without the right of the landlord to object. Brown v. Safeway Stores Inc., 94 Wash.2d 359, 617 P.2d 704 (1980). An example of this type of clause would be:
Tenant shall be entitled to sublet or assign this Lease or the Premises, in whole or in part, at any time.
1.2No Subletting or Assignment Whatsoever. The opposite of the default rule discussed in the preceding Section 1.1 is a lease that contains an absolute bar on subletting or assignment. For example:
Tenant shall have no rights to sublet or assign this Lease or the Premises, in whole or in part, at any time.
Although this is a direct restraint on the alienation of property, which courts dislike, such a covenant is generally upheld in courts outside of Washington. However, no Washington case has yet addressed this issue. A total bar on subletting or assignment of a lease is very rare in commercial leases. Note that an assignment in violation of such a restrictive clause does not void the transfer, but rather makes it by the landlord. Bellevue Square Managers, Inc. v. GRS Clothing, Inc., 124 Wash. App. 238, 98 P.3d 498 (2004); Brazier v. Ighani, 119 Wash. App. 1067, 2003 WL 23019951 (Wash. App. Div. 1) (2003) (unpublished); OTR v. Flakey Jakes, 112 Wash.2d 243, 770 P.2d 629 (1989); Morrison v. Nelson, 38 Wash.2d 649, 231 P.2d 335 (1951).
1.3Landlord’s Sole Discretion. A landlord desiring tight control over a tenant’s ability to sublet or assign is likely to require a clause in the lease with something akin to the following: