Assigning a lease is when a renter transfers their rights and obligations in a Lease Agreement, either commercial or residential, to another person. Generally, when you assign a lease, you move out peranently, and a new tenant moves in for the remainder of the lease term.
There are several reasons why you might need to lease a property for commercial or residential reasons. Perhaps you need to downsize your business or relocate for work or school, or your business is facing financial difficulties. If you’re a new landlord looking for lease agreement templates, visit CocoSign to customize, download and e-sign your contract.
Whatever the reasons, a Lease Assignment Agreement can help you transfer your lease to someone else and vacate the property without breaching the original lease agreement. It’s a great way to end your lease on good terms and without paying any early termination fees.
However, there are few essential things to consider before you assign a lease to someone else.
Things to Consider Before Assigning A Lease
What happens if you need to leave your rental before your agreement ends? Depending on the lease, different requirements need to be satisfied before the original tenant can be released of any lease-related responsibilities.
You Need Your Landlord’s Consent
Sometimes your landlord will include a clause in the original lease agreement called master lease that allows you to assign your lease to a new tenant. However, if your lease doesn’t mention assignment, you need to seek consent from the landlord through a document called License to Assign. For more details about License to Assign forms, check the CocoSign website.
Unfortunately, not obtaining consent before assigning your lease could result in a negative outcome, including the assignee getting evicted from the property. While your landlords cannot reasonably withhold their consent for the assignment, they are under no obligation to give their consent if the new tenant doesn’t meet the terms set out in your contract.
It’s wise to find a potential tenant that meets landlords’ expectations. Some of the things a landlord checks before assignment of the lease include:
- Financial Status: Your landlord might want to check employment status, current payment tabs, and account statement, including credit, to determine if the tenant is in a strong position to meet applicable property fees.
- References: You’re required to provide assignee previous landlords statements to show tenant reliability to meeting property responsibilities and any history of missed payments or evictions.
- Intended use of the property: Your landlord may probably want a tenant that will use the premises in broadly the same way you have been operating in the past.
- Required alterations: Provide advanced notice of any changes the new tenant may wish to make to the property.
Understand Your Liabilities When Assigning A Lease
After signing a lease assignment, you’re not automatically exempt from all liabilities related to the property or the original lease. Continuity liability is a concept that states you’re still liable should the new tenant breach the terms of the contract, fail to pay rent or damage the property.
It’s essential to know whether you’re liable or not. You should ensure you understand any potential liabilities you may have in the property before assigning your lease to a new tenant.
Whether or not continuing liability applies to your situation depends on if any clauses concerning it are included in your Landlord’s Consent to Lease Assignment. In some cases, you’ll be released from liability, meaning is only the assignee that can be held liable for issues with the property.
In other instances, a clause regarding liability will indicate the assignor is liable for the assignee’s conduct, including paying late rent, property damages, or fines related to conduct like noise ordinances.
Master Lease Still Applies
Before your potential assignee accepts the assigned lease, it’s essential to keep in mind the terms of the master lease still apply to the rental property. A lease agreement includes all the terms regarding assigning your lease with detailed information about the property, original lease dates and the start of the lease transfer, a clause of continuing liability, etc.
However, this document is different from the original lease agreement. It doesn’t contain the lease and rent payment specifics, property and common areas rules, utilities, rights and obligations of the landlord and tenant, and more.
For that reason, you and the new tenant need to go through the master lease. Ensure that a copy of the master lease is attached to the lease assignment agreement for their assignee records.
Assigning a lease is not the same thing as subletting, although the two terms are often confused. With the sublet, the original tenant temporarily gives up an apartment but is still responsible for all the terms stated in the lease agreement despite a new tenant paying rent.
With an assignment, the original tenant gives up the apartment permanently. A direct relationship is established between the new tenant and the landlord, meaning the landlord collects rent directly from the assignee.
There are plenty of reasons as to why you may wish to assign a lease to another party. A lease agreement can help you transfer your lease to someone else without breaching the terms of your contract. Unfortunately, exiting a lease early is not always a simple process. Many factors should be considered before beginning this process. Utilize the tips above to get started.