I just read a posted question on Linked in from a commercial salesperson who was inquiring what kind of language they should recommend to their landlord client regarding the tenant's ability to assign or sublease the premises. The questions read:
"I need advice on inserting a Transer Clause in a Commercial Lease Contract.
I need to consider a clause in a Commercial Lease, which will allow the present tenant to sell their business, assign the lease to the new owner, and ultimately be released from the lease completely.
Is there such a clause? Does it protect the landlord? Should I include vebiage to cover any financial obigations my landlords may incur from this transaction. Would it be better to include this info in an addendum or in the Original Lease contract?"
My response was:
"First, you shouldn't be putting clauses like this in a commercial lease unless you are an attorney. Can you say, call my E & O carrier, not to mention it is probably a criminal act in whatever state you are in.
The landlord would first need to know if a lease is transferable by the tenant, and under what conditions, without any language at all in the lease on the subject. California law used to be that a lease could be assigned upon the landlord's reasonable consent. That has since changed and the landlord can now refuse an assignment or sublease in its complete discretion. Most attorneys however, put language in the lease making it clear what the tenant's and landlord's rights and obligations are.
When representing a landlord, I never recommend putting in language allowing an assignment or sublease and relieving the assigning tenant of its lease obligations, unless the landlord really wants the deal and the provision is a deal breaker. Far too often the assignee or new owner stops paying rent and the landlord is left holding the bag. Other exceptions to my general rule, may include situations where the new owner is significantly stronger, financially then the assignor, but if that is the case, keeping the assignor on the hook is less likely an issue.
There are dozens of other sophisticated provisions that allow a sublease or assignment, but insure that the landlord gets the maximum amount of income possible from the property, including an assignment of all rents on a sublease to the landlord or the payment of all consideration paid by the new owner attributable to the value of the lease.
The bottom line is that whatever is put into the lease or not, is a matter of fairly sophisticated legal advice."
What do you think? Was my response to harsh or did I just sound like I was protecting my turf as an attorney?
There is no reason that a commercial real estate agent couldn't know and understand lease clauses as well as I. The problem is that unless the broker or agent is licensed as an attorney in the state that they are providing advice, they are likely considered practicing law and putting themselves in harms way. I don't even think recommending one lease form over another is proper.
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