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Commercial Leasing Law & StrategyFeaturesLandlord Tenant LawLitigation

Considering Lease Assignment Provisions in the Light of an Enterprise's Broader Business Plan

By Terrence M. Dunn
June 01, 2018
Scenario

What Could Have Been Done

General Assignment Provisions
  • Assignments not permitted without landlord's consent, with no conditions attached;
  • Assignments permitted only with landlord's consent, not to be unreasonably withheld, with reasonability only generally defined or, more commonly, not defined at all;
  • Consent not to be unreasonably withheld, with criteria established as to what constitutes a reasonable refusal to consent, or, conversely, criteria that would require consent if standards or parameters are met; and/or
  • Assignment not permitted without consent, with certain exceptions which do not require consent or for which consent is presumed granted (sometimes referred to as Permitted Transfers):
    • To an entity resulting from the merger, consolidation or reorganization of tenant or to the entity benefiting from the sale of substantially all of the tenant's assets;
    • To an entity of net worth (or some other measured financial standard) equal to or greater than the tenant, or meeting some specific numerical standard (e.g., $1.5 million net worth and $750,000 liquidity); and/or
    • To an entity that operates a specific number of units similar to tenant's business, having five years' operating experience and a net worth equal to or greater than tenant's.
The Requirement of Consent Rowe v. Great Atl. & Pac. Tea Co. Mutual Life Ins. Co. of N. Y. v Tailored Woman The Definition of 'Reasonability' i.e. Logan & Logan, Inc. v. Audrey Lane Laufer, LLC Astoria Bedding, Mr. Sleeper Bedding Ctr. v Northside Partnership Definitions of 'Assignment' Recapture or Termination Rights

Encumbrances and Leasehold Mortgages

Releases Changes in Terms Landlord's Share of Consideration

Conclusion

***** Terrence M. Dunn
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