Assignment v. Subletting

One of the most misunderstood aspects of commercial leasing is the difference between assignments and subleases.

I recently received an assignment of lease which was attempting to assign 1/2 the premises to one assignee and the other 1/2 to another assignee.

Spoiler Alert - this is not an assignment!

An assignment is a transfer of all of all of tenant’s rights under the lease for the entire premises for the entire remaining term.  The assignment of the lease puts the assignee in a direct contractual relationship (privity) with the landlord.  The original tenant typically remains liable for the lease obligations (although sometimes the parties negotiate the release of the assignor/original tenant); thus, the original tenant effectively becomes the guarantor of the lease.

A sublease, on the other hand, is a transfer of something less.  So it might be a transfer of a portion of the premises or all of the premises for less than the remaining term or a transfer of all of the premises for the remaining term for less rent than payable under the lease.  The subtenant does not have a direct contractual relationship with the landlord and so subtenant’s rights flow through the sublandlord.

So in my example, the assignment was actually 2 events: (1) an assignment to ABC corp. for the entire premises for the remaining term at the same rent, and (2) a sublease by ABC to XYZ of ½ the premises for the remaining term.

For more on assignments and subleases, I recommend Brent C. Shaffer, ed., The Sublease and Assignment Deskbook: Legal Issues, Forms and Drafting Techniques for Commercial Lease Transfers (ABA, 2^nd ed., 2013).