Assignment Vs Sub-Lease; The Essentials

So What is the Difference Between a Lease Assignments and a Sub-lease?

The key difference is that an assignment places the assignee into a direct contractual relationship with the landlord, while a sublease does not.

 This distinction occurs because in an assignment the tenant/assignor assigns its contractual interests in its lease to the transferee/assignee, who then assumes such contractual interests, and also assigns the tenant/assignor’s property interests in the leased premises. Simply put the assignee has assumed the contractual position of the assignor and taken over his property interests as well.

Before an assignment the landlord and tenant enjoyed “privity of contract” with one another, and the tenant had and enjoyed possession of the leased premises and all of the rights and benefits of such possession. After an assignment the landlord and the assignee enjoy privity of contract with one another and the assignee enjoys possession of the leased premises and all of the rights and benefits of such possession. As a result the assignee becomes the direct tenant of the landlord, while a sublessee does not.

An assignee pays its rent directly to the landlord, while a sublessee does not. This difference occurs because after an assignment the assignee is directly obligated to the landlord to keep, observe and perform all of the tenant’s covenants and obligations under the lease, while by contrast a sublessee pays its rent to the sublessor under its sublease, who in turn remains obligated to pay its rent under the owner/landlord under its lease. After an assignment the assignee’s acts, omissions or other conduct of are the only ones that directly affect the landlord/tenant relationship of the owner/landlord and the assignee/tenant, not the acts, omissions or other conduct of the original tenant/assignor..

A sublease creates a new, direct contractual relationship between the sublessor and the sublessee, while an assignment transfers the assignor’s contractual relationship with the owner/landlord. This distinction occurs because a sublessee has no resulting contractual relationship with the underlying landlord, because the contractual interests of the transferor under its underlying lease are not transferred by a sublease. The sublease stands only in its own right. The contract that directly governs the sublessor and sublessee and their relationship is the sublease, not the underlying lease to which the sublessor is and remains a party as the tenant. The owner/landlord is not a party to the sublease, and is not obligated to perform pursuant to the sublease.

All of the rights and interests of the sublessor and sublessee created via the sublease will subject to the terms and conditions of the underlying lease, which remains in effect as between the landlord and the tenant while the sublease is in effect, while all of the rights and interests of the assignee are created by the lease itself. This crucial difference exists because the rights and interests created by a sublease are derivative interests created out of or from the interest of the tenant, and are subordinate to the underlying lease.

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 letter.

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