Question: What is the difference between assignment and subletting?Answer:
Assignment and subletting occur in instances when an existing lessee (tenant) wishes to abandon his lease before the date specified in the lease agreement.
An assignment of a lease is the transfer of the entire property and giving over of proprietary rights under the lease to a new tenant. A sublease only transfers a part of the interest in the property. So when you assign a lease you give up your rights in relation to the property and the lease, when subletting you retain these rights and share them with the sublessee.
A sublease can apply to a physical part of the property, or for a period of time within the existing lease. This might happen when an existing tenant, the ‘head tenant’, wishes to rent out a part of the property such as a room or a basement to another person, the ‘sub-tenant’, without giving up the entire property, OR if they wish to rent out the entire property for a period of time within their fixed-term lease. The sub-tenant treats the head tenant as their landlord, as the head tenant retains his tenancy agreement with the actual landlord and assumes liability on behalf of the sub-tenant for any loss or damage they may cause.
You will need the consent of the landlord in order to assign lease or sublet – before you do so, speak directly with your landlord or consult a leasing lawyer.
Answered by Emma Jervis
Emma is an experienced franchise lawyer and litigator who has successfully helped many clients achieve commercial and workable solutions to their legal problems. With over 10 years legal experience, Emma has run many cases in all tiers of the NSW Court system and Family Court of Australia, as well as having many years experience in advising clients of their legal rights in both the commercial and family law spheres. Emma is also experienced in drafting a range of documents, including franchise documents and complex commercial contracts.
A lease assignment agreement is a formal agreement transferring a tenant's rights and obligations to a new tenant. A lease subletting agreement is a more flexible arrangement that involves a lessee allowing an additional tenant to use the leased space, often on a temporary or short-term basis. Subletting arrangements may involve a secondary tenant using a space such as a commercial kitchen during the hours when the primary tenant isn't using it. Alternately, a subletting agreement could involve a secondary tenant could commit to using a space during a period such as a month or a season when the primary tenant is out of town.
Commercial lease agreements typically include provisions and terms regarding requirements and rules for subletting and assignment. Most commercial lease agreements specify that a tenant must obtain his landlord's permission before subletting his space; however, the landlord is usually prohibited from unreasonably withholding consent. Because a lease assignment is more permanent than a lease sublet, a landlord will generally be brought into the process to create an assignment agreement and sometimes to vet the new tenant by performing a credit check.
A lease assignment usually involves a fee being paid to the landlord to compensate him for the expense and time of meeting with a prospective new tenant and preparing a lease assignment agreement. As of 2012, a typical assignment fee for a commercial lease is $500. Although a primary tenant is usually required to obtain a landlord's permission before creating a subletting agreement, the terms of this this agreement are worked out between the primary tenant and the subletter, without the involvement of the landlord,
Both subletting and lease assignment agreements hold the primary tenant responsible for any damage or unpaid rent for which the secondary tenant is liable. Although a secondary tenant who signs an assignment agreement may commit to paying rent and taking out a liability insurance policy payable to the landlord, if the secondary tenant is unable to pay, the landlord can hold the primary tenant responsible for rent and damages regardless of the secondary tenant's lease assignment commitment. Similarly, a tenant who extends a sublet agreement to a secondary tenant still holds the primary responsibility for damages and debts associated with the property.
A secondary tenant who signs a lease assignment agreement typically makes payments directly to the landlord because he has signed an agreement defining the terms between the two parties. A lease assignment often requires that the secondary tenant pay the full amount of the rent. In contrast, a secondary tenant who sublets a commercial space may agree to pay less than the full original rental amount, especially if she is just using the space during off hours. She will pay her rent to the original tenant rather than to the landlord.
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