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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
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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