assignment of lease from seller to buyer form

Assignment of Lease: How It Works and Parties Involved

Jump to section, what is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Benjamin W.

Parties involved in lease assignment.

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

Image via Pexels by RODNAE

Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

Get Help with an Assignment of Lease

Do you have any questions about a lease assignment and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from real estate lawyers who specialize in lease assignment.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment of Lease Lawyers

Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.

Jeremiah C.

Creative, results driven business & technology executive with 24 years of experience (15+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.

I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!

Texas licensed attorney specializing for 22 years in Business and Contract law with a focus on construction law and business operations. My services include General Business Law Advisement; Contract Review and Drafting; Legal Research and Writing; Business Formation; Articles or Instructive Writing; and more. I am able to draft and review contracts, and have experience with, contract law and business formation in any state. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.

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Charlotte L.

I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.

With over 25 years of experience in the technology sector, I am a strategic business counsel, outsourced general counsel, and a leader of high-performing legal teams aimed to help maximize the efficiency of all stakeholders. I recently joined the renewable energy space with the addition of a new client on its way to becoming the first Chinese battery company to build a battery manufacturing presence in the US beginning with a 1+ GWh cell and pack plant, and a domestic anode and cathode plant. In my most recent full-time role, I served as the Sr. Director and Assistant General Counsel at SMART Global Holdings, where I served as the general counsel for the HPC and AI division of this publicly traded holding company, comprised of four companies, before becoming the global head of the commercial legal function across all portfolio companies, including two multinational industry leaders. During much of my career, I provided outside legal services on a recurring basis for several years advising several high growth start-ups and venture firms as well as house hold names, and also led one of the country's fastest growing infrastructure resellers and managed services providers. My core competencies include contract review, commercial negotiation, legal operations, information security, privacy, supply chain and procurement, alliances and channel sales, HR, and general corporate. I am passionate about leveraging my legal skills to achieve business solutions, supporting innovation and growth in the technology sector, and helping maximize the commercial flow and efficiency at growing companies. I hold an undergraduate business degree, a JD, a MSBA Taxation, and certifications from the California Bar Association, Six Sigma, and ISM.

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Assignment of Lease

Contract to lease land from a church?

I’m planning on leasing land from a church. Putting a gym on the property. And leasing it back to the school.

Ok; first step is that you will need a leasing contract with the church. Ask them to prepare one for you so you would just need an attorney to review the agreement and that should cost less than if you had to be the party to pay a lawyer to draft it from scratch. You need to ensure that the purpose of the lease is clearly stated - that you plan to put a gym on the land so that there are no issues if the church leadership changes. Step 2 - you will need a lease agreement with the school that your leasing it do (hopefully one that is similar to the original one your received from the church). Again, please ensure that all the terms that you discuss and agree to are in the document; including length of time, price and how to resolve disputes if you have one. I hope this is helpful. If you would like me to assist you further, you can contact me on Contracts Counsel and we can discuss a fee for my services. Regards, Donya Ramsay (Gordon)

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Assignment of Lease – By Landlord/Lessor — RPI Form 595

This form is used by an escrow officer, property manager or landlord when a buyer of an income property assumes the seller’s rights and obligations under existing rental and lease agreements, to transfer the seller’s interest in the lease agreement to the buyer.

Lease assignments – transfers of rights and obligations under a lease

Transfer of any interest.

A commercial lease agreement entered into by a tenant contains an assignment and subletting provision. This provision is also called a:

• restriction-on-transfer  provision;
• restraint-on-alienation  provision; and
• lease assumption .

An assignment of the leasehold held by the original tenant under a lease agreement transfers the tenant’s entire interest in the property to a  successor tenant , leaving no interest held by the original tenant. However, on an assignment the original tenant named on the lease agreement remains liable for the  successor tenant’s  performance on the lease, whether or not the landlord consents to the assignment or that the successor tenant becomes primarily responsible for the lease obligations.

In contrast to an assignment, when entering into a sublease with a subtenant, the original tenant (who is now a  master tenant ) transfers to the subtenant less than all of the master tenant’s interest in the property. Also, possession reverts back to the master tenant on expiration of the sublease.

The tenant’s assignment on their transfer of possession

Consider a tenant who sells or transfers the business they operate on the premises to a new business owner. Together with the sale of the business, the lease for the premises which the business occupies is also transferred to the new business owner.

The  Assignment of Lease – By Tenant/Lessee  form references:

• the original lease and the premises subject to the assignment [See  RPI Form 596 §1 ];
• the successor tenant to whom the lease is assigned [See  RPI   Form 596 §2 ]; and
• the agreement by the successor tenant to assume and timely perform all lessee obligations under the lease. [See  RPI   Form 596 §3 ]

The Assignment of Lease form is signed by both the tenant and the assignee in the presence of a notary when recording the assignment. The form is then recorded with the office of the county recorder in the county in which the premises is located.

The owner’s assignment on a sale of income property

Similarly and in juxtaposition, consider an owner of income property subject to a lease or rental agreement who intends to sell or transfer their fee ownership in the property to a new owner. Here, in addition to signing a grant deed to the property, the owner also enters an assignment of all the lease agreements entered into with the existing tenants.

An owner of income property assigns their interest in existing lease agreements as part of a transaction for a:

• concurrent sale of the fee ownership to the property;
• concurrent creation of a master lease as the landlord to a master tenant; or
• sale of an existing lease without the concurrent sale and transfer of the fee ownership in the property. [See  RPI   Form 595 ]

The  Assignment of Lease – By Owner/Landlord   form references:

• the original lease and the premises subject to the assignment [See  RPI  Form 595 §1 ];
• the purpose of the transfer [See  RPI   Form 595 §2 ];
• the new owner to whom the lease is assigned [See  RPI   Form 595 §3 ]; and
• the agreement by the new owner to assume and timely perform all lessor obligations under the lease. [See  RPI   Form 595 §4 ]

As with the tenant’s Assignment of Lease form, when recording the owner’s Assignment of Lease form, it is signed in the presence of a notary by both:

• the owner of the property as the lessor under the lease agreement transferring their interest in the lease; and
• the successor owner acquiring the property subject to the lease.

The form is then recorded with the office of the county recorder in the county in which the premises is located.

Form navigation page published 02-2016.

Form last revised  2015 . 

Article: Lease assignments and subleases

Form-of-the-Week: Assignment of Lease – Forms 595 and 596

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Navigating the assignment of a residential lease

A landlord can assign his leases to a new buyer of his building. Likewise, a tenant may be able to assign his lease if he needs to relocate. Find out how to assign your lease and what you can do to protect yourself when doing so.

by   Ronna L. DeLoe, Esq.

Ronna L. DeLoe is a freelance writer and a published author who has written hundreds of legal articles. She does...

Read more...

Updated on: December 4, 2023 · 3 min read

Assignment of lease by the tenant

Assignment of lease vs. sublease, assignment of lease by the landlord.

As a tenant, you may want to get out of your residential lease without paying the remaining rent. Likewise, if you're a landlord and sell your rental property, the buyer must now collect rent from the tenants, who may have no idea you sold the property. In both situations, assignment of a lease with a release for the tenant and assignment of leases with notice by the landlord accomplish these goals.

If you're the tenant and want to leave before the end of your lease term, you may be able to assign your lease to a third party if the landlord doesn't let you out of the lease. The third party then becomes the new tenant, who is bound by the terms of the original lease and pays rent to the landlord.

Most often, the lease won't permit assignment without the landlord's approval, but leases often state that the landlord cannot unreasonably withhold consent. As long as you produce a tenant who's shown a history of payment under prior leases and has been a model tenant, a landlord should consent to assignment.

The assignment of lease form should include places for the tenant-assignor, the new tenant-assignee, and the landlord to sign. If the master lease allows assignment, then the tenant doesn't need the landlord's permission; the tenant can sign an assignment of lease agreement without the landlord's signature.

If the landlord allows an assignment of the lease, you, as the tenant, also want him to sign a release stating that you're not responsible for the new tenant's failure to pay or for any damage she causes. Without such a release, you may still be liable for both.

When you, as the tenant, assign the lease, you sign an agreement that either reads “Assignment of Lease," “Lease Assumption Agreement," or “Assignment and Assumption Agreement." An assumption of the lease means that the new tenant assumes your obligations, such as paying rent and keeping the apartment in good condition.

An assignment of a lease transfers the tenant's entire rights in the property to a third party. With a sublease, on the other hand, the tenant transfers only a portion of the remaining lease. For example, if the original tenant has six months remaining on his lease and he gives the entire six months to a third party, the tenant is permanently assigning his rights to live on the property to the third party. If, however, the tenant allows that third party to stay at the premises for only three months, and the tenant intends to return after three months, he is subleasing the premises.

A landlord can assign the right to collect rent to someone who has purchased the property. An assignment of lease from the seller to the buyer allows the new landlord to collect rent from any and all current tenants in the building. The language in the landlord's assignment of lease agreement can include assignment of security deposits, if the parties agree to it. An assignment of leases by the landlord to the buyer affords protection to the buyer so he can collect rent.

An assignment of leases by the landlord to the buyer is meaningless if tenants aren't aware the landlord sold the property, which is why it's important for the assignor-landlord to give tenants proper notice. A notice of assignment of lease, which is a form signed by both the assignor-landlord and the assignee, or new landlord, is one way to give notice. Another way is to send a letter on the landlord's letterhead. Either way, the notice must include the new landlord's address and how rent is to be paid.

Both landlords and tenants who become assignors should sign a formal assignment of lease agreement, which an online service provider can prepare for you. If you're the tenant who has assigned your lease, try to get a release or you'll still be liable to the landlord. If you're the landlord, make sure you can count on the new tenant to pay the rent before you release the primary tenant from his obligations under the lease.

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WTO / Real Estate / Lease Agreements / Free Assignment of Lease Forms | Word – PDF

Free Assignment of Lease Forms | Word – PDF

Do you need to move out of your rental for a job or to go to school? Is your family expanding, or do you need to cut down on some of your bills to downsize? When you are in the middle of your lease, it may seem like you are stuck and can’t get out of the agreement. But an assignment of lease can be the trick you need to get ahead.

What is Assignment of Lease?

It is a tool that a tenant can utilize if they wish to get out of their lease ahead of time and assign it to another tenant.

Not all landlords will allow this, and if they do, they often have specific rules about how it can occur. When the landlord allows it, the tenant can move out of the rental and not worry about the penalties of breaking their lease.

Different names are used for an assignment of lease. Some of these include:

• Lease transfer
• Assignment agreement
• Lease assignment agreement
• Lease assignment form

No matter the name it goes under, it will serve the same purpose. This agreement will be useful to a tenant who wishes to leave the rental property ahead of the end of the lease. If they want to leave after six months and the lease is for one year, they may need to do a lease assignment with their landlord to help fill the rental before leaving.

This will help them solve this problem. With the permission of the landlord, the tenant can transfer their obligation under the lease over to another person. Once the landlord agrees , the new tenant (assignor ) can move in and follow the same rules that the original tenant ( assignee ) did, including property maintenance and any rent obligations. This will then release them from the obligations under the lease, allowing them to move and sign a new lease without a bad recommendation.

Most states require the landlord to be reasonable when it comes to a lease assignment. They do not have to accept each person you bring to them, especially if that person has a bad rental payment history or another problem that the landlord would not usually tolerate in their properties. But the landlord is not allowed to make things unnecessarily difficult, and they can’t refuse a tenant only to keep you on the property.

Both parties must have sufficient paperwork to help keep things organized. This should start with a properly drafted assignment so that all parties, including the landlord, new tenant, and old tenant, can understand which obligations are being transferred and who will be part of the new lease. This agreement can make the new tenant and landlord relationship run smoothly.

Types of Lease Assignment

The type of lease assignment the tenant will sign depends on the type of lease agreement the tenant has from the start. They may live in a residential home and need to do a lease assignment that works for that, or they could be a major business that will need assignment to leave the commercial property.

Residential lease assignment

When a tenant lives in an apartment, duplex, single-family home, or another place that they call home and need to move out before the end of the lease, they can do an assignment of lease. This allows them to find another tenant for the landlord, someone who will take their place and continue with the terms of the lease.

When the original tenant chooses to do a lease assignment, they will contact their landlord. The landlord can then screen the tenant to make sure their background, credit, and past rental history match up with who the landlord is comfortable renting out to. After these checks are done, the landlord can write the assignment and sign it with both the original and new tenant before the new agreement begins.

Commercial lease assignment

Some leases are between landlords and commercial businesses. The business utilizes the building in order to run their day to day operation. The business may decide that they no longer want to rent that property in the middle of their lease. The business can use the lease assignment form to help them get out of the lease with a new business in their place.

Assignment Vs. Sublease

Some tenants may be confused about the differences between a sublease and a lease assignment. Both of these will involve the original tenant finding someone new to take over the property, but they are different processes. If the tenant wants to do an assignment of lease, they need to do it the proper way to make sure it is done the right way.

The assignment will occur when the tenant works with the landlord to transfer their lease over to a new tenant. The new tenant must agree to take over the lease, keeping the property maintained and paying the rental amount each month. The previous tenant will no longer have their name on the lease and is free to move on to a new property without having to keep up with the obligations of the lease. The landlord will be part of this agreement as they do screenings and need to approve the new tenant.

The sublease will be when the tenant chooses to hand over the obligations of the lease to someone else through a subleasing agreement. The landlord is not part of this agreement, and they often do not approve of subleasing because it can allow an unknown person into the property without the landlord’s approval. The tenant will be held responsible for the original lease and all of its terms, so it can be a risky thing to work on.

You must look through the original lease agreement to see what rules are in place for subleasing or doing an assignment of lease. Most lease agreements will include whether one or both of these are allowed and will list out the specific steps that the tenant must follow for both of them.

What to Include

Each lease assignment will be a little different, and it may depend on the unique components that were in the original lease from the start.

Some of the items that you should include in your document include the following:

Type of lease

List out details about the type of lease that this letter should concern. The type of lease is usually either commercial or residential.

Location of property

Write out the physical location or complete address of the property to make sure there is no confusion in understanding the document. Make sure that the address includes the city name, the state, and the zip code along with it.

Parties’ details

There are three parties who will agree to the assignment of lease, including the landlord, the assignor or the original tenant, and the assignee or the proposed new tenant. Include relevant details about each individual, including their names and addresses.

Original lease term

The original tenant will need to include the terms of the original lease. They can pull out the lease and include information like the start and the end dates of that lease. The landlord could look these up, but it is helpful to have them in place to avoid confusion.

Start date of the lease transfer

Everyone should agree on the date that the lease transfer will occur. This will be the date that the current tenant need to be out of the property, and the new tenant will take over. Most leases will stipulate a certain amount of notice for the landlord, with 30-days being the standard. So make sure there is enough time for all parties involved to get ready for the change in the lease.

Assignor’s continuing liability

The lease assignment needs to list out the amount of liability the original tenant will have for the property and the lease when they move out. This will point out whether the assignor is still liable to the landlord after the lease is assigned.

Lead paint disclosure

Lead paint disclosure is only required in certain areas, but if it is, then the disclosure will also need to be included in the lease assignment.

This assignment also needs to have a copy of the master lease, or the original lease that the assignor and landlord worked on together. A copy needs to be given to the new tenant, so they understand the rules and obligations of moving into the rental.

Given below are lease templates:

Who is Liable in an Assigned Lease?

When the original tenant is looking to do an assignment of lease so they can move out, they need to take a look at who is liable. The original master lease will often give some clues about who will be liable here. If this is not listed out in the master lease, then the landlord will get to decide whether it is the original tenant or the new tenant who will be liable for the property.

The lease assignment can help to tell who is liable here. Make sure to list out the specific situations when the assignor or the assignee will be the ones responsible for property damages, fines for non-compliance, or missed rental payments. If the assignor has been legally released from this kind of liability, the landlord will not be able to come back at them later on for repayment or damages to the property.

It is possible that the assigner will be liable, even after they leave the property and do the assignment of the lease. In this situation, the landlord can get payments from the assignor if the assignee does not make payments on time or damages the property. Utilizing the assignment agreement can help make things safe. This can be done through a release from liability.

Many landlords do not want to release the assignor from their liability. This protects the landlord more because they get the chance to go after two people, rather than one, to help with late payments or damages. The tenant will need to understand the laws and regulations in their state and add in clauses to the assigned lease to help figure out whether they can excuse themselves from liability when they move out.

Even with a release from liability or a clause that releases the tenant if there is a change in ownership of the property, there are certain expenses that the original tenant may still be responsible for. Therefore , the assignor needs to be very careful about the assignee they choose for the property to ensure that they won’t have any large, unexpected fees to deal with later.

Important Considerations

There are a few things that the assignor needs to consider before they decide to write out an assignment for the lease.

Some of the things to consider include:

Get legal assistance from a professional

Before you write out an assignment of lease, you should consider talking to a lawyer who specializes in real estate or contracts in general. They will make sure that your letter is written legally and follows the rules of your lease. It is possible that the landlord will not be open to this agreement, but the real estate lawyer can help you see whether there are other options available. With the help of a real estate lawyer, you will be able to work with them to make sure the legal language protects the assignor and that the landlord will accept the agreement.

Give assignee a copy of the original lease

The asignee needs to receive a copy of the original lease to look over before they agree to the lease assignment. This helps them see the terms of the lease, the amount they owe each month, and any other requirements they must follow if they take over the lease. Therefore, attaching the master lease to your new lease assignment is necessary.

Review your local and state laws

Each area is a little different in terms of the rules you need to follow for your assignment of lease. In some areas, you may need to notarize the assignment of the lease or have witnesses when you sign, or it will not be legal. Having these witnesses will make it take a little more time, but will help prevent challenges to the validity of the document later.

The local and regional laws on renting, leasing, and real estate will vary, and the exact ones will tell you what can be included in the assignment and what your own legal obligations are. Even the language that you include or keep out of the lease assignment will vary based on where you live. So always look up the real estate laws in your area or work with a professional to make sure you do this right.

Is a Landlord’s Consent Required for a Lease Assignment?

As you take a look through your master lease, you will usually find a clause that states any lease assignments need to have the landlord’s written consent before they become effective. The landlord may also list other requirements that the tenant needs to follow in order to have a valid transfer of the terms of the original lease. You must follow the instructions in the original lease before proceeding with the assignment of the lease to make sure that the landlord will not fight it later.

You can’t have someone move into the apartment without telling your landlord. This can be a breach of the lease and can land you in some legal trouble. It is important to have the consent of the landlord. The landlord is not able to unreasonably withhold permission for this either. As long as you choose a good tenant to replace you (one who can pass the background and income check of the landlord), most landlords will agree to this, unless the exact terms of the original lease say it is not allowed.

In some jurisdictions, the landlord may consent to the change by not responding. If they do not respond to your assignment of lease by a certain date, the assignor is allowed to consider that consent and can proceed with the transfer, them moving out of the rental and the new tenant moving in. The assignor should check their local laws to see whether this applies to them or not.

If the landlord decides that they will not accept your assignment of lease, then ask for the reasons in writing. The landlord may not withhold consent based on the race or sex of your assignee, but they can refuse if the assignee has an eviction history or does not make enough income to pay the rent on that property.

Final Thoughts

There are different reasons why a tenant will need to leave their rental before the end of the lease, and they want a way to get out of it without breaking the terms of their lease or having larger fees imposed upon them. An assignment of lease is a great way to help with this. When approved, the landlord agrees to let the assignor put an assignee into the property, someone who will take over the lease and finish it out. By understanding a lease assignment, you could help keep the landlord happy while being able to move on to the next chapter of your life.

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Lease Assignment Agreement

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A Lease Assignment Agreement is a short document that allows for the transfer of interest in a residential or commercial lease from one tenant to another. In other words, a Lease Assignment Agreement is used when the original tenant wants to get out of a lease and has someone lined up to take their place.

Within a Lease Assignment Agreement, there is not that much information included, except the basics: names and identifying information of the parties, assignment start date, name of landlord, etc. The reason these documents are not more robust is because the original lease is incorporated by reference , all the time. What this means is that all of the terms in the original lease are deemed to be included in the Lease Assignment Agreement.

A Lease Assignment Agreement is different than a Sublease Agreement because the entirety of the lease interest is being transferred in an assignment. With a sublease, the original tenant is still liable for everything, and the sublease may be made for less than the entire property interest. A Lease Assignment transfers the whole interest and puts the new tenant in place of the old one.

The one major thing to be aware of with a Lease Assignment Agreement is that in most situations, the lease will require a landlord's explicit consent for an assignment. The parties should, therefore, be sure the landlord agrees to an assignment before filling out this document.

How to use this document

This Lease Assignment Agreement will help set forth all the required facts and obligations for a valid lease assignment . This essentially means one party (called the Assignor ) will be transferring their rights and obligations as a tenant (including paying rent and living in the space) to another party (called the Assignee ).

In this document, basic information is listed , such as old and new tenant names, the landlord's name, the address of the property, the dates of the lease, and the date of the assignment.

Information about whether or not the Assignor will still be liable in case the Assignee doesn't fulfill the required obligations is also included.

Applicable law

Lease Agreements in the United States are generally subject to the laws of the individual state and therefore, so are Lease Assignment Agreements.

The Environmental Protection Agency governs the disclosure of lead-based paint warnings in all rentals in the States. If a lead-based paint disclosure has not been included in the lease, it must be included in the assignment. Distinct from that, however, required disclosures and lease terms will be based on the laws of the state, and sometimes county, where the property is located.

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Assignment and Assumption of Leases (Commercial Real Estate Purchase and Sale) | Practical Law

Assignment and Assumption of Leases (Commercial Real Estate Purchase and Sale)

Practical law standard document 5-522-3187  (approx. 10 pages).

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Assignment of Lease

In most cases, the lease is an integral part of a business sale process. When you sell a company, any existing lease for office space, storage, or shopfront must also change hands if the buyer intends to run their business from the same location.

A lease is often separate from a business sale agreement and does not automatically transfer to the business buyer. The transfer process is called an assignment. To successfully assign a lease from business seller to buyer, the landlord must also provide consent by signing the lease assignment document (view below).

View the full collection of legal documents required when selling or buying a business.

ASSIGNMENT OF LEASE

This assignment of lease has been made by the Seller, [INSERT SELLER NAME], and the Buyer, [INSERT BUYER NAME], with the Landlord’s consent [INSERT LANDLORD NAME].

The effective date of the assignment is on [INSERT DATE].

As indicated in the Business Sale Agreement dated ______________, the Buyer has been assigned by the Seller all the rights of the Seller in the lease attached, dated ___________ that includes the premises whose location is at ___________________.

The Buyer has assumed the lease, including all the terms therein effectively accepting this assignment. From the date the assignment goes into effect, the Landlord will be paid the rent by the Buyer and the Buyer will also meet all other obligations of the Seller as per the lease.

With the premises inspected by the Buyer satisfactorily, the buyer will accept the possession of the premises as it is, subject to the obligatory maintenance of the Landlord as per the lease and any applying law.

Confirmation

Accordingly, the Landlord confirms:

• That all rent due has been paid via ____________.
• That a security deposit worth $______ is being held by the Landlord, which according to the terms of the lease the Landlord will continue holding for the Buyer.
• That the Seller is not in default and has not defaulted on the performance of any obligations as per the lease.
• That the lease as it was written hasn’t been altered and that the lease remains effectively in full effect.

The Landlord has consented to this assignment, including consenting that the Seller’s obligations and rights have been taken over by the Buyer as per the lease.

Reimbursement

The Seller will right away be reimbursed by the Buyer the total amount of the security deposit, including rent or other funds the Seller may have paid in advance as per the lease with the commencement of the effective date on this assignment.

The Seller has been released by the Landlord from liability for rent payment and from performance of any lease obligation with this assignment’s effective date.

The parties’ assignees, successors and heirs benefit from this agreement and are bound by it.

Modification

The agreement may only be modified by writing and signed by the party against whom the desired modification is sought to be enforced.

Severability

In case the court ascertains that any of the provision contained in this agreement is unenforceable or invalid, any unenforceability or invalidity will only affect that specific provision. The provision in question shall only be amended, limited or modified to the extent necessary to ensure the provision becomes enforceable and valid.

In case any party decides to waive at any time any of this agreement’s provision, the waiver will be effective only for the specific purpose and instance for which the waiver was granted. Where any of the parties delays exercising or fails to exercise any of this agreement’s remedies or rights the party still retains enforcement right of that provision or term at a future date.

Governing Law

The agreement is construed and governed in accordance with State of __________ laws.

____________________________________

Printed name: __________________

Business Name: ________________________

Address: ___________________________

Date: _____________

Printed name: _______________________

Title: ________________________

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Lease Purchase Agreement: Benefits for Buyers and Owners

Updated: Feb 16, 2023, 11:00am

If you own a home that you’re having trouble selling, or if you want to buy a home but you’re not financially qualified, a lease purchase agreement could be appealing. Here’s how they work, along with what you should consider as a potential buyer or seller under this type of contract.

What Is a Lease Purchase Agreement?

A lease purchase agreement—also known as a rent-to-own or lease-to-own agreement—lets someone rent a property for a specified period of time with the promise to purchase it at the end of the lease term. The owner is contractually obligated to sell the property to the renter when the end of the term hits. Likewise, it also obligates the renter to buy the property from the owner.

Lease purchase agreements are considered a type of alternative financing (like land contracts ). There’s not a lot of data about how often these arrangements succeed, so both parties should approach them with caution.

We’ll use the terms renter and buyer interchangeably in this article and do the same for the terms owner and seller.

How to Structure a Lease Purchase Agreement

Property sellers and buyers can structure a lease purchase agreement however they want. As long as both parties find the arrangement acceptable, they’re free to set their own terms for both the rental period and the eventual sale.

However, certain terms may have to fall within guidelines established by local, state or federal laws, such as the Fair Housing Act and landlord-tenant laws.

Contract of Sale

The whole point of a lease purchase agreement is for the owner to sell the property and the renter to buy it. So, the contract needs to include sale terms, such as:

• Sale date (or purchase date): The day, month and year when the renter will give the seller the required sum to buy the property and the seller will file paperwork with the local government to record the ownership change.
• Sale price (or purchase price): The amount the renter will pay to purchase the seller’s property. This might be the property’s current market value plus an inflation, appreciation or depreciation factor.
• Option fee (and due date): The sum the renter will pay the owner (and when) for the exclusive right to buy the property on the sale date. This is typically not refundable.
• Option agreement: Whether the seller will put the renter’s option fee toward the purchase price or not.
• Right to sell the option: Whether the renter can sell the purchase option to another party (for example, if the renter needs to move out of state or realizes it won’t be financially feasible to buy the home).
• Owner default: The consequences if the owner decides not to sell the property.
• Buyer default: The consequences if the renter decides not to buy the property.

Both the buyer and seller may want to review each other’s credit reports for red flags as well. If the buyer’s credit is poor, they may not qualify for a mortgage by the purchase date. If the seller’s credit is problematic, their home could be at risk of foreclosure.

The contract should also outline who will pay certain closing costs . It may be wise for the buyer to perform a title search before signing the contract so that they can confirm—at least as of the lease start date—no one else has a claim against the property. Sellers must also provide buyers with certain disclosures about the property’s condition and history, such as lead-based paint disclosures for most homes built before 1978.

Similarly, it may be wise to pay for a professional home inspection and appraisal up front to make sure the property is worth the purchase price.

Lease Period

The lease period works much like a traditional lease, but with a few key differences. The contract will need to define the terms of the lease period leading up to the sale, such as the beginning and ending dates of the lease, monthly rent amount, security deposit, rent increases and penalties for late payments or breaching the agreement.

In addition, the contract should also go over the following:

• How much rent is allocated to the purchase price: What portion of the monthly rent payment, if any, will the owner consider to be part of the renter’s down payment toward owning the property.
• Escrow: Stipulating the use of an escrow service to protect the renter (and how the renter and owner will share the cost of this service). The escrow company will collect and hold the renter’s security deposit, option payment and portion of the rent allocable toward the down payment until the renter buys the home or defaults on the contract.
• Right to sublet: Whether the renter can sublease all or part of the home to anyone else during the lease term.
• Modifications: What changes, if any, the renter can make to the property.
• Lease cancellation: How much the renter will owe the owner, in addition to forfeiting the option fee and any additional rent, if they break the lease.
• Insurance: The owner may need to carry landlord insurance to protect the property the renter intends to buy. Renters may need to carry renters insurance to protect personal possessions and provide liability coverage.
• Property taxes: The owner must remain current on property tax payments.
• Maintenance, repairs and utilities: Which maintenance, repairs or utilities, if any, the renter will be responsible for and which the owner will be responsible for.

Buyers and owners may wish to add additional terms to the contract defining things like pet rules, smoking rules and parking fees. Each party would be wise to hire a real estate attorney or real estate agent to represent them and help protect their interests in drawing up the contract.

Pros and Cons of a Lease Purchase Agreement for Buyers

The renter will have to accept certain risks in exchange for potential rewards when they enter a lease purchase agreement.

Pros of a Lease Purchase Agreement for Buyers

• Time to improve finances: The lease period gives the buyer time to save up for a down payment and increase their income so they’ll be in a stronger position to buy and own a home. It also gives them time to pay down debt and establish a record of making monthly payments on time.
• Opportunity to lock in a purchase price and property: It can be hard to save for a home when market prices are a moving target, and it can be hard to find the right property to buy. A lease purchase agreement gives the renter a chance to secure their preferred home and purchase price without having to pay the full price up front.
• Chance to test out the home and neighborhood: While losing the option fee and any rent payments would be costly, they might be an acceptable loss if the renter decides the property is unsuitable for their long-term needs.

Cons of a Lease Purchase Agreement for Buyers

• Loss of down payment and option fee: If the buyer can’t improve their finances enough to qualify for a mortgage by the sale date, they forfeit their option fee and additional rent payments (if any) to the seller. They may also have to move and secure a new lease, both of which could be costly.
• Seller could fail to pay landlord insurance, mortgage or property taxes: If they don’t maintain insurance, there might not be funds available to repair any property damage a policy would have covered. If the owner’s mortgage lender or the local tax authorities place a tax lien on the property, it could prevent the renter from being able to buy it. The renter might even get evicted during the lease term. Other life disruptions (divorce, disability, serious illness) could also cause the seller to lose the home.
• Seller could back out: If the home’s value increases significantly over the lease period, the seller might have a strong financial incentive to break the agreement, assuming the contract doesn’t provide a significant penalty for doing so.

Pros and Cons of a Lease Purchase Agreement for Sellers

The property owner will also have to accept certain risks in exchange for the potential reward of selling their home.

Pros of a Lease Purchase Agreement for Sellers

• Sell an unmarketable home: Most owners would rather sell their home immediately and not deal with a lease purchase agreement. If attempts at a regular sale have failed, a lease purchase agreement could be the solution.
• Earn money even if the sale falls through: The option fee and possibly excess rent—along with the regular rental income from the property—could be better than letting the property sit vacant.
• Get a more responsible tenant: Someone who intends to buy a property will likely take care of it as if it were their own.

Cons of a Lease Purchase Agreement for Sellers

• Lose money if the home’s value increases: Locking in a sale price at the outset could backfire if the local real estate market appreciates more than expected.
• Tenant could be a nightmare: Even a tenant who seemingly wants to buy the home may take poor care of the property or fail to pay rent. The owner could have to evict them, which can be an expensive, lengthy and difficult process.
• Buyer could back out: If the home’s value decreases significantly from the lease purchase agreement price, the buyer might have a strong financial incentive to break the agreement. There’s also no guarantee that the buyer will be able to qualify for a mortgage when it’s time to buy the home.

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Amy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers, insurance companies, payment companies and leading personal finance websites. Amy also has extensive experience editing academic papers and articles by professional economists, including eight years as the production manager of an economics journal.

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Corporate Insights: Top Considerations When Preparing to Sell a Company

Have you received an offer to buy your company? Congratulations! But there is work ahead.

The first step is to understand the specific deal structure, be it an asset sale, equity sale or merger. The owners should also work with tax advisors to determine if the transaction will be taxable or tax-free.

Consider how difficult it may be to obtain internal approvals. If the company has a “crowded” cap table, equity holder approval may require some effort and steps should be taken to make sure this can be completed efficiently.

Contemplate if the buyer wants to leave anything behind, such as certain debts or obligations. This can be dealt with in different ways under each deal structure.

Aside from equity holder and board consents, make sure you are aware of any other regulatory or contractual third-party consents required to consummate the transaction. For many smaller businesses, a good amount of enterprise value is tied to the company’s contractual relationships.

Examine whether any of these contracts require the counterparty’s consent to the contract’s assignment to the buyer. Does the contract deem a change of control of the company an assignment of the contract? Asset sales typically require more third-party consents than equity sales.

Seller’s Financial Statements and Projections: Normally, a buyer will want the target company’s financial statements for the previous three years, either audited or unaudited (depending on the business). During the due diligence process, a buyer will also likely want to see a target’s balance sheets, income statements, cash flow statements, and tax returns. This will help the buyer evaluate required working capital as well as any potential earn-out milestones.

Timeline to Market, Negotiate and Close: Time kills many deals, and deal fatigue is a real phenomenon. The longer transactions take, the more likely market conditions can change, the buyer or seller’s financial position can change, or sellers can have second thoughts about selling their business. The timeline of any deal varies based on size and complexity.

Generally speaking, for most private, middle market deals, 60-90 days is a realistic timeline from signing a Letter of Intent (LOI) to closing. LOIs generally have an exclusivity period between 120 and 180 days.

Areas of Concern : The indemnification section in a definitive agreement is often one of the most heavily negotiated components of a deal document. Indemnification protects a party from losses associated with, for example, a breach of a representation or warranty, like an insurance policy, such that a seller will defend, hold harmless and make whole, the buyer, for any losses in the event the seller breaches any representation or warranty. Sellers are also usually indemnified for limited matters.

When negotiating indemnification, typically, the seller wants to limit (1) the duration of time for which its indemnity obligation continues post-closing, and (2) the amount for which a buyer may seek indemnity. The buyer aims to carve out certain representations and warranties as “fundamental representations” that will not be subject to the same indemnification limits. It is important to understand your business’ vulnerabilities and risk tolerance for an indemnity claim. Other points to consider are deductibles, representation and warranty insurance, and indemnification escrows.

Key Personnel: Founders often form key relationships with people within their organizations who have had a significant hand in increasing the company’s value. Identify who they are and socialize the terms of their employment with the buyer. This is particularly important if you are discussing an earn-out. Buyers and sellers may want to consider certain incentives (financial or otherwise) in order to maximize value retention through the closing, and value realization post-closing. Businesses that focus on client service will want to pay special attention to this issue.

Non-Competes: As a founder, be prepared to potentially continue to provide service to the company post-closing under an employment agreement and to be bound by a non-competition agreement should you separate from the company. Despite the recent FTC decision, non-competes are still valid under a limited “sale of a business” exception. A buyer will want to prevent a seller from using its newly acquired deal proceeds from starting a new business and applying its know-how and experience to directly compete with the sold business. It is important that a seller understand the parameters of any proposed non-competition agreement, and if necessary, negotiate for certain carve-outs such as small minority shareholding, board seats not involved in the day-to-day activity, or pre-existing side ventures that the seller would like to continue post-closing.

Licensing: It is important for buyers and sellers to understand their respective obligations to properly transfer licenses from seller to buyer, or alternatively for the buyer to obtain new licensure so that the business can continue operations on day one post-closing.

Real Estate Considerations

It is important that real estate issues are properly addressed in the transaction, as they can materially impact the outcome of the deal.

Leases: Is the business being purchased party to a lease agreement concerning the underlying property? Acquiring companies should pay special attention to the terms of the lease. The acquiring company may desire to enter an assignment and assumption of the acquired company’s interests in the existing lease. Where required, make sure that landlord consent to any assignment and assumption is received but also that proper prior notice is given to the landlord in accordance with the terms of the lease agreement. In the event of an equity sale, an exception for a change of control transaction contained in the existing lease agreement could potentially eliminate the need for landlord consent. Lastly, if the current lease has any guarantors, those guarantors will likely want to be released from the lease in the event of an assignment and assumption of lease.

Ownership of Property: It is also important to consider whether the company being acquired own real property. In these instances, the acquiring company may have the option to purchase such real property as part of the acquisition of the seller. If so, the acquiring company, as part of its due diligence process, should consider having a detailed title examination completed and purchase owner’s title insurance. Further, the acquiring company should contemplate obtaining an ALTA survey of the property prior to the expiration of its due diligence period.

Assessments and Inspections: Acquiring companies may consider performing Phase I or Phase II environmental site assessments, depending on the nature of the target company’s business, to determine if there are any unknown environmental liabilities. This may apply regardless of whether the target company leases or owns the real estate where the business is located. It may also be beneficial to have an inspection of the property and the buildings located there completed, if under the terms of the existing lease agreement concerning the property, the tenant is responsible for the maintenance, repair and replacement thereof and the acquiring company has agreed to be bound by the terms of the existing lease pursuant to an assignment and assumption of lease.

Subordination, Non-Disturbance and Atonement Agreement (SNDA): When a target company does not own the real estate where the business is located, the acquiring company should inquire as to the existence of an SNDA between the target company and any lender holding a mortgage on the property. If no SNDA exists, it may be advisable that the acquiring company enter into an SNDA as a requirement under the assignment and assumption of lease between the target company and acquiring company.

There are many considerations to take into account when buying or selling a company. 

Bowditch is a highly regarded law firm handling sophisticated transactions, challenging litigation and complex regulatory issues for businesses, families and institutions throughout Massachusetts, the region and beyond. With more than 60 lawyers seamlessly connected in three strategic Massachusetts offices – Boston, Framingham and Worcester ­– Bowditch is deep in the areas of business and finance, real estate and environmental, litigation, employment and labor, and estate and tax planning, delivering outstanding client satisfaction and quality legal services. Visit Bowditch.com to access insights and analysis on the latest legal developments and thought leadership, as well as to find out more about our services and how we can assist.

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