Last week, we began a discussion about a particular dilemma that arises out of “subletting.” [You can see that blog posting by clicking: HERE.] Basically, a subtenant has no greater rights against the actual landlord than does its sublandlord. Absent an agreement with the “real” landlord, if the underlying lease is terminated, the sublease is “over.” What kind of subtenant would invest in the subleased space or (especially in a retail project) spend time and effort to build location-specific good will if the vitality of its sublease depends on the health of its sublandlord? In a lot of cases, the reason a tenant seeks a subtenant in the first place is because the tenant can’t “handle” the space. There is a solution, and it is called a “recognition agreement.” Last week, we presented the “problem” in some detail. Today, we’ll explore various approaches to a solution. As we disclosed last week, today’s blog is heavily based on an article we wrote more than 10 years ago. So, to the few readers who find today’s posting vaguely familiar, we apologize. [Read more…]
To Recognize Or Not To Recognize? That Is The Question (Part 2)
A Shortcut To Drafting A Sublease That Might Be The Long Way To Get The Job Done
A sublease is really no different than a lease other than its title and the use of different labels (subtenant instead of tenant; sublandlord instead of landlord; sublease instead of lease; etc.). It needs to convey an interest in real property and it needs to establish the contractual relationship between the subtenant and its sublandlord. One might think it to be “special” because it is constrained by a superior lease (master lease; overlease; etc.), but that’s not any different than a lease being constrained by a superior mortgage, a restrictive easement agreement, zoning laws, etc. In each case, the grantor (landlord or sublandlord) can’t give greater possessory rights than it, itself, has and can’t give any contractual rights that it has agreed (say in a mortgage) it won’t give or that the law won’t allow. Neither can a sublandlord.
But, there is an approach that crafters of subleases often use that is not available to crafters of leases. That’s by using an “incorporation by reference” form of sublease. [That’s not to say leases never incorporate parts of other documents by reference to those documents, references to laws being one example. And, its also not to say that there couldn’t be a publication with “standard lease terms” that might be incorporated by reference, as is done when requiring one party or the other to abide by ASTM, ASHRE or similar standards, just that, if that is being done out there, it’s a rare occurrence.] [Read more…]
PrintThere’s Only One Form Of Sublease: The One That Fits The Deal
For reasons that will go unexplained, Ruminations has been thinking, lately, about subleases. It hasn’t been the ins and outs, the details, the clever wording, that’s been on our mind. No, we’ve been taking a step backwards and Ruminating about some conceptual issues, like “what type of sublease?”
[There’s a quiz at the end of today’s posting, unrelated to subleasing. Take a gander.]
You see, if you pull a subleasing form out of the “book,” what you get is a document that overlays the underlying lease. A popular local form freely admits to this when it uses such terms as “Overlease” (the tenant-landlord lease already in existence) and “Overlandlord” (the “tenant-sublandlord’s own landlord). [Read more…]
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