Assigning & Subleasing Commercial Real Estate Leases

Contact Neufeld Legal PC for commercial leasing legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Although the assignment and subletting of one’s commercial leased premises is rarely a top priority when a commercial tenant is looking to enter into a commercial lease agreement and attain a new leased premises, it can be very consequential in future years.

Given the future significance of assigning or subleasing the leased premises, or a portion thereof, based on future business circumstances that are not presently known to yourself, it is important that you properly understand what is and is not permissible under the proposed form of commercial lease agreement, and whether modifications thereto must be sought based on commercial business realities.

It is important to know whether or not you have the right to assign, sublet, or otherwise part with possession of all or part of the leased premises; in what circumstances; whether prior written approval from the landlord is required; whether the landlord’s approval is not to be unreasonably withheld or delayed; if there are tests for the landlord withholding approval; ensuring that the landlord’s tests for withholding approval are “without limitation” to other reasonable tests; what information about the assignee or the subtenant is required to be delivered to the landlord; and timing requirements.

You should also determine whether successive assignees and any subtenants are required to become contractually bound to the landlord in writing to effectuate the assignment or the sublease.

You will also want to understand whether or not the original commercial tenant remains liable under the lease, subject to a release by the landlord, and under what conditions.

The commercial lease agreement will also typically set out the manner in which the provisions of the commercial lease apply to the assignee or the subtenant.

This also means carefully understanding provisions regarding:

Right of first refusal in favour of the landlord.
Sharing of profit rent with the landlord or payment of 100% to landlord.
Assignment of subtenant’s rent to the landlord.
The landlord’s right to terminate the lease.

Also of particular note are any provisions in the commercial lease agreement regarding subsequent assignment, subletting, etc. Furthermore, the commercial tenant needs to understand any prohibition or constraints from advertising the leased premises for rent, sublease, etc.

It is also important to recognize that most landlords charge an assignment fee (or other transfer fee), as well as the commercial tenant’s responsibility to pay all legal and other fees and disbursements incurred by the landlord in considering the tenant’s request for an assignment and documenting same.

The ability of a commercial tenant to assign the leased premises to another commercial party or sublet a portion of the leased premises while retaining the remainder of the premises, and the terms and constraints under the lease agreement are of significant importance.

For knowledgeable and experienced legal representation in negotiating, reviewing and drafting lease agreements, and protecting your business’ legal rights thereunder, contact lease lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.

Assigning & Subleasing Commercial Leases

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