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…]
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Last week, we alluded to a lease transfer situation that had recently come across our desk, and then Ruminations detoured to its usual ranting to start a discussion about why a landlord should have any right to interfere with its tenant assigning the lease or subletting the leased space. Thanks for the comments we got directly to Ruminations by way of comments, by way of comments posted to LinkedIn, and privately.
A situation came across our desk this week and we thought we’d work it into a piece about circumventing assignment and subletting restrictions. As we started to scribble some notes, we were forced to rethink some of the whys and wherefores of these restrictions in the first place. And, that’s the plan today, leaving “circumvention” for later, probably next week.
Following last week’s posting about what Ruminations would call a misunderstanding regarding the economic theory behind the freedom to assign a lease, we received some calls to discuss how an assignment differs from a sublease. Given the frenetic activities involved in getting ready for this past weekend, Ruminations was happy to comply by taking advantage of what seemed like easy pickings – republishing a snippet from a piece written in 2008.
“You can’t freely assign your lease because I own the property. I’m in the real estate business. You aren’t. No one is going to make a profit from the real estate business but me.”
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