Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Frequently Negotiated Lease Provisions

A typical commercial lease will contain 30 to 40 pages, and we have already discussed several key economic items. Now we will delve into areas that often go beyond the boilerplate provisions and therefore will usually be more heavily negotiated.

Assignment and Subletting

Assignment and subletting provisions are usually lumped together, yet in practice they can be very similar or very different. An assignment results when the tenant gives up all of his rights and liabilities under the lease to a successor. In contrast, with a sublease, the tenant retains some interest in the tenancy. For example, the tenant may retain the continued right to use a portion of the leased premises. Alternatively, the term of the sublease may not correspond exactly with the term of the lease between the landlord and the tenant/sublessor (Master Lease).

When I mentioned that the provisions could be very similar, I was thinking, for example, of a scenario in which the tenant/sublessor sublets the entire suite for the remaining term, less one day. This sublease looks very much like an assignment. In contrast, if the sublease is for a small portion of the suite, for example, one room on a short-term basis, the sublease is very different from an assignment that gives up all the tenant has since here the tenant/sublessor has given up very little.

The threshold question is whether or not the landlord's consent is required for the assignment or sublease. The lease controls, ...