Assignment Clause

Definition

An assignment clause is a lease provision that governs a tenantâ€™s ability to transfer its lease interest to another party (the assignee). The clause typically requires landlord consent and outlines whether the original tenant remains liable after assignment.

What Is an Assignment?

An assignment occurs when a tenant transfers its entire remaining lease interest to a new party, who assumes the rights and obligations under the lease.

Assignment vs. Sublease

Assignment: Transfers the full remaining lease term.
Sublease: Transfers only a portion of the term; original tenant remains primary obligor.

Common Assignment Clause Provisions

Landlord consent requirement (often â€œnot unreasonably withheldâ€).
Financial qualifications of proposed assignee.
Use restrictions.
Recapture rights.
Profit-sharing provisions on assignment.

Continuing Liability

Many leases provide that the original tenant remains liable even after assignment unless the landlord provides a written release.

Example

A retail tenant sells its business and assigns its 7-year lease to the buyer. The landlord approves the assignment.

If the lease includes continuing liability, the original tenant remains responsible if the new tenant defaults.
If released, liability shifts entirely to the assignee.

Landlord Considerations

Protects tenant credit quality.
Maintains tenant mix integrity.
Prevents undesirable uses.

Tenant Considerations

Flexibility in corporate restructuring or sale.
Ability to exit long-term lease obligations.
Negotiation of release language is critical.

Underwriting Implications

Assignment flexibility may reduce long-term income certainty.
Credit review of assignee is essential.
Strong assignment controls improve asset stability.

Common Pitfalls

Ambiguous consent standards.
Failure to document landlord approval in writing.
Ignoring recapture clauses.
Overlooking continuing liability exposure.