For an assignment to occur, the leaseholder, the assignee and the landlord or property manager must all sign an assignment agreement. You can draft your own assignment agreement, sign it with your proposed assignee and send it to your landlord for their review.
Unlike with a sublet agreement, the lease assignment agreement must be signed by your landlord. They may or may not release you from the lease as part of the agreement. This means that if you assign your lease and don't sign an agreement that clearly frees you from all obligations to pay the rent, you are still liable if the person who took over your lease defaults for any reason.
Flip provides a template assignment agreement that you can review, customize and sign with your landlord. Keep reading if you want to understand each term in the assignment agreement.
Start with getting clarity between you and your assignee about the date that the assignment will occur and the basic terms of the master lease:
- When does the master lease end?
- What is the rent amount?
- Who pays for utilities? As a default, you can stipulate that the assignee transfers the utilities into his or her own name.
Covenants Regarding the Master Lease
You can't assign something you don't not have and your assignee will want to be assured that you are in fact the primary leaseholder. State that your name is on the master lease and that you are in good standing with the owner. Include a copy of the master lease.
If there is any information about the renewal lease, such as the new rent amount that will be charged when the lease turns over, it may also be included.
Default and Nonpayment Definitions
As with a sublet agreement, you should clearly define what it means to default on the lease agreement. Unlike with a sublet agreement you can use the same definition that is in the master lease so you do not need to redefine these terms.
Default and Nonpayment Recourse
A lease assignment agreement should clarify:
- What happens if the assignee defaults
- Who is responsible for dealing with it
Some assignment agreements will leave obligations on the shoulders of the outgoing tenant. You may encounter an assignment agreement that has a term like this one:
In the event of default by the Assignee the Landlord will provide the Tenant with written notice of this default and the Tenant will have full rights to commence all actions to recover possession of the Premises (in the name of the Landlord, if necessary), including commencement of eviction proceedings. This agreement will immediately become null and void.
CONSENT TO THIS ASSIGNMENT WILL NOT DISCHARGE THE ASSIGNOR OF ITS OBLIGATIONS UNDER THE LEASE IN THE EVENT OF A BREACH BY THE ASSIGNEE, UNLESS THE ASSIGNOR LATER RETAKES POSSESSION OF THE PREMISES FROM THE ASSIGNEE.
You don't want this. It means that you have gone to the trouble of assigning your lease but are still just as responsible for its obligations as you would be if you had sublet the space. If possible, you should make sure that your assignment agreement has a release clause instead of the above. Here is the release clause in our standard assignment agreement:
In the event of default by the Assignee the Landlord will have full rights to commence all actions to recover possession of the Premises including commencement of eviction proceedings. This agreement will immediately become null and void.
CONSENT TO THIS ASSIGNMENT WILL DISCHARGE THE ASSIGNOR OF ITS OBLIGATIONS UNDER THE LEASE IN THE EVENT OF A BREACH BY THE ASSIGNEE, UNLESS THE ASSIGNOR LATER RETAKES POSSESSION OF THE PREMISES
If you do not sign an agreement with a term like the above then you are still responsible for the monthly rent even if you assigned your lease.
Consent from all Stakeholders
As with a sublet agreement, you should sign the assignment agreement, get your assignee to sign it and then send it to your landlord for consent.
Review our sample assignment agreement if you are ready to move forward. You may also want to consider subletting instead of assigning your lease.
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