There are many reasons why you may need to lease property for residential or commercial reasons, such as signing a lease to rent a unit with roommates or renting a commercial space for your business. Often, signing a Lease Agreement means you’ve agreed to rent the property for a specific period of time. But what happens if you need to leave your rental before your agreement ends?
Perhaps you need to relocate for work or school or you need to downsize your business; whatever the reason, a Lease Assignment Agreement can help you transfer your lease to someone else and vacate your rental property without breaching your original Lease Agreement.
In this post, we cover what it means to assign a lease and explore a few important considerations individuals should make before deciding to do so with their own rental property.
What Does it Mean to Assign a Lease?
Assigning a lease is when a renter transfers their rights and obligations in a Lease Agreement (either commercial or residential) to another person. Generally, tenants decide to assign a lease when they need to vacate a rental property before their lease expires for whatever reason (for example, they need to reduce their living costs or transportation time or find a new space for a growing business).
Regardless of why a person needs to end a lease early, assigning a lease to a new person using a Lease Assignment Agreement can be a great way to end your lease on good terms and without paying any sort of early termination fee (a fee that some landlords may require to end a lease before a Lease Agreement expires). However, there are a few important things you should know before you decide to transfer your lease to someone else.
Consideration #1: You Need Your Landlord’s Consent
Sometimes, your landlord will include a clause in your original Lease Agreement (sometimes called a master lease) that indicates whether or not you can assign your lease to someone else.
If the master lease doesn’t mention assignment, it is recommended that you get consent from your landlord in writing before agreeing to assign your lease. This can be done using a Landlord’s Consent to Lease Assignment form. Unfortunately, not obtaining consent before assigning your lease could result in a negative outcome, including the assigned tenant (who is called the assignee) getting evicted from the property.
Consideration #2: You May Still be Liable
After signing a Lease Assignment, you may think that you no longer have any obligation to the property or the original lease, but this is not always the case. Continuing liability is a concept that means the original tenant (who is called the assignor) may still be liable for breaches of the lease or damages to the property caused by the new tenant (the assignee). Whether or not continuing liability applies to your situation depends on if any clauses in relation to it are included in your master lease or your Landlord’s Consent to Lease Assignment.
In some instances, the assignor will be released from liability and the landlord can only hold the assignee 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).
Knowing whether you are liable or not is essential, and you should ensure you understand any potential liabilities you may have in the property before assigning your lease to someone else.
Consideration #3: The Master Lease Still Applies
Before your prospective assignee agrees to take on the assigned lease, it is important to remember the terms of the master lease still applies to the rental property.
A Lease Assignment Agreement will contain all the terms regarding assigning your lease, including information about the property, the original lease dates and start of the lease transfer, details about continuing liability, and more.
It typically doesn’t contain the terms of the Lease Agreement itself, such as the lease and rent payment specifics, the rights and obligations of the landlord and tenant, property and common area rules, and more. This is why it is important to go over the master lease with the person you plan to transfer it to and ensure a copy is attached to the Lease Assignment Agreement or provided to the assignee for their records.
Assigning Your Lease to Someone Else
Being locked into a Lease Agreement can be a burden at times when you need to move away for work, lower your living costs, close your business seasonally, or relocate your store to a higher traffic area. A Lease Assignment Agreement can help you transfer your lease to someone else without paying an early termination fee or breaching the terms of your contract. Before assigning your lease, it is crucial you understand how assigning a lease works, including knowing if you have your landlord’s consent (and if you need it), if you are still liable for your assignee’s conduct, or if the master lease still applies.