In an assignment agreement, the person seeking to assign the lease to a third party is called the assignor. The new third party who steps into the lease agreement to take over occupancy of a former tenant or receive rent payments by landlord assignment is called the assignee.
If local landlord tenant laws are silent on assignment of leases, then any consent to assignment or lease assignment information and requirements in the master lease will govern. If the master lease is also silent on the issue of subleasing and assignment, typically the courts have held that the tenant has the right to assign the lease.
Assignment Agreement by a Tenant
A lease assignment by a tenant is an assumption of lease by a third party, called the assignee or subtenant, through a contract assignment of the lease in effect between the current tenant, also called the assignor, and landlord. In this lease assignment situation, a transfer of lease is made so that the new tenant can take over lease occupancy rights and make rent payments. However, unless the landlord will agree to release the current tenants, they will remain liable under the master lease if there is a breach of lease by the assignee. Therefore, an assignment of lease sample form may include an assumption of the lease by the assignee or subtenant, as well as a release of the assignor tenant from the terms of the master lease by the landlord. However, this isn't standard and typically the landlord will require compensation for such an agreement.
Landlord Assignment of Rents
Lease assignments may also refer to when a landlord agrees to pay a creditor through an assignment of rents due under leases on rental property. It is often used to pay a mortgage lender in case the landlord defaults on the mortgage loan. If the landlord defaults on the mortgage, or files bankruptcy, any rental income from the property gets paid directly to the lender through the lease assignment agreement. Courts are divided on whether assignment of rents creates a security interest in the property in favor of the assignee.
Differences Between an Assignment of Lease and a Sublease
- In a sublease, the subtenant pays rents to the original tenant, whereas the assignee in a lease assignment pays rent directly to the landlord.
- In an assignment of lease, the tenant transfers all of the rented premises for the remainder of the lease term and is typically used when the tenant wants to permanently get out of the lease. In contrast, a sublease is more commonly used when the original tenant is away for a short period and wishes to transfer less than the full term of the lease or just needs a roommate to share the space.
- A sublease allows the original tenant or assignor to walk away without ties when release and assumption of lease agreements are included with the lease assignment document or assignment of lease example.