Definition
An assignment of lease refers to the transfer of a lease agreement by the current tenant (the assignor) to another party (the assignee). This legal transaction transfers the entire parcel of rights and obligations under the lease from the assignor to the assignee. At common law, leases are transferrable without explicit permission, although most contemporary leases include covenants that restrict this practice without the landlord’s consent.
Examples
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Commercial Property Transfer: A business owner who is closing operations may assign their lease to another business, transferring all rights and responsibilities stipulated in the original lease agreement.
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Residential Lease Assignment: A tenant relocating for a job may assign their apartment lease to a new tenant, provided the landlord agrees, and the new tenant assumes all obligations of the lease.
Frequently Asked Questions (FAQs)
1. Can a landlord refuse an assignment of lease?
Yes, the landlord can refuse an assignment of lease if the lease agreement includes a covenant requiring their consent for assignments and the landlord has a valid reason for the refusal.
2. What happens if the lease agreement is breached by the assignor?
If the assignment breaches a covenant in the lease agreement, the landlord may have the right to terminate the lease and re-enter the premises.
3. Does the assignee inherit all obligations of the lease?
Yes, the assignee inherits all obligations and rights under the lease, just as if they were the original tenant.
4. Can an assignor still be held liable after assigning their lease?
Typically, the assignee assumes all liabilities and obligations under the lease, though the original tenant may still have residual liabilities depending on the lease terms and jurisdictional laws.
5. How does an assignment of lease differ from a sub-lease?
An assignment of lease transfers the whole estate and rights under a lease, while a sub-lease transfers only part of the interest, and the original tenant retains some responsibilities under the lease.
- Lease: A contract outlining the terms under which one party agrees to rent property from another party.
- Covenant: A condition in a lease agreement that restricts the tenant’s actions or decisions, such as assignment or sub-letting.
- Head Lease: The primary lease agreement from which sub-leases are derived.
Online References
Suggested Books for Further Studies
- “Real Estate Law, 11th Edition” by Marianne Jennings
- “Commercial Lease: A Practical Guide” by Mark Davies
- “The Essential Guide to Renting Out Your Property: From Lease Agreements to Landlord Liabilities” by David Fitzgerald
Accounting Basics: Assignment of Lease Fundamentals Quiz
### Can a lease be assigned without restrictions according to common law?
- [x] Yes, leases are freely transferable at common law.
- [ ] No, leases always require landlord permission.
- [ ] Yes, but only for residential leases.
- [ ] No, leases cannot be transferred under any circumstances.
> **Explanation:** According to common law, leases are freely transferable, although many modern lease agreements include covenants that restrict this practice without landlord consent.
### What is transferred in an assignment of lease?
- [ ] Only the rights to use the property.
- [ ] Only the obligations of the lease.
- [x] The whole estate and all rights and obligations under the lease.
- [ ] None of the above.
> **Explanation:** An assignment of lease transfers the assignor's entire estate, including all rights and obligations, to the assignee.
### What is the legal term for conditions in a lease that restrict assignment?
- [ ] Regulations
- [x] Covenants
- [ ] Amendments
- [ ] Stipulations
> **Explanation:** Conditions in a lease agreement that restrict certain actions like assignment are known as covenants.
### What can a landlord do if an assignment occurs in breach of a covenant?
- [ ] Increase the rent.
- [ ] Reduce the lease period.
- [x] Terminate the lease and re-enter the property.
- [ ] Nothing, the assignment stands.
> **Explanation:** If an assignment occurs in breach of a covenant, the landlord may have the right to terminate the lease and re-enter the property.
### When a lease is assigned, who becomes responsible for the lease obligations?
- [ ] The assignor retains all responsibilities.
- [x] The assignee assumes all responsibilities.
- [ ] Both the assignor and assignee share responsibilities.
- [ ] Neither becomes responsible after assignment.
> **Explanation:** Upon assignment, the assignee assumes all responsibilities for the lease obligations.
### Can an assignor still be liable after assigning their lease?
- [x] Yes, depending on lease terms and jurisdictional laws.
- [ ] No, assignors are always free from liability.
- [ ] Yes, through only financial responsibilities.
- [ ] No, if both parties agree.
> **Explanation:** Depending on the terms of the lease and local laws, an assignor may still have residual liabilities even after assigning the lease.
### What differentiates an assignment of lease from a sub-lease?
- [ ] Only an assignment requires landlord consent.
- [ ] An assignment transfers only part of the lease.
- [x] An assignment transfers the whole estate; a sub-lease does not.
- [ ] Sub-leases are not legally recognized.
> **Explanation:** An assignment of lease transfers the whole estate and rights under a lease, while a sub-lease transfers only part of the interest.
### Does an assignment of lease affecting covenants follow general property law?
- [x] Yes, covenants must adhere to general property law.
- [ ] No, covenants are exceptions.
- [ ] Only certain covenants need to follow property law.
- [ ] None of the above.
> **Explanation:** Covenants affecting lease assignments must adhere to general property law, ensuring valid restrictions and enforcements.
### If a tenant moves due to relocation, what is a typical method of relieving lease responsibilities?
- [ ] Terminating the lease
- [ ] Sub-leasing
- [x] Assigning the lease
- [ ] Selling the lease
> **Explanation:** When relocating, it’s typical for a tenant to assign their lease to a new tenant, thereby transferring lease responsibilities.
### Are landlords entitled to increase rent during an assignment of lease?
- [ ] Yes, always.
- [ ] No, under no circumstances.
- [x] No, unless specified in the lease agreement.
- [ ] Yes, in residential leasing only.
> **Explanation:** A landlord is not generally entitled to increase rent during an assignment of lease unless it is explicitly specified in the lease agreement.
Thank you for delving into the intricacies of lease assignments, and ensuring your grasp on these fundamentals with our quiz. Keep enhancing your expertise in real estate and property law!
