Suppose Landlord leases an apartment to Tenant for 2 years
at a rental of $1000 per month. Six months into the lease, Tenant has an
opportunity to spend 6-months studying in London at the London School of Economics.
T would like to transfer his leasehold interest to a third party to recapture
some or all of his rental liability.
A few quick issues here.
However, it is typical for the lease to provide that the
Tenant may not sublet or assign his leasehold without the express written
permission of the Landlord. Sometimes the lease will provide that the Landlord
will not unreasonably withhold his consent, and some courts judicially impose a
reasonableness standard even in the absence of such language in the lease.
There are also two types of transfers of lease interests—assignments
and subleases.
As one commentator puts it: “As assignment is a transfer of the [tenant’s] entire interest in the
premises for the entire unexpired term of the lease, the assignor retaining no
reversionary interest in the property. It is a transfer by the Tenant of the
identical estate he acquired under the lease.”
A sublease is a transfer in which the original Tenant “retains
a reversion or at least a reversionary interest in the leased premises. A
common example of a sublease is a transfer of the original Tenant’s interest
for a term less than the unexpired term of the lease.”
So, in our example above, in which the Tenant will go away
for 6 months but wishes to resume living in his apartment when the 6-month
study trip is over, the Tenant is probably thinking about subleasing his
property for six months to a subtenant—he will wish to retain a reversion
following the 6-month sublease so he can resume living in his apartment for the
last year or so of his 2-year lease.
But now assume that a Tenant—Cornelius Husker--is a law
student who moves to Lincoln for law school and signs a 3-year lease for an
apartment right across the street on Holdredge. Assume Husker flunks out of law
school and is not admitted to the Dental College!
He wants to go back home to South Dakota and work for his
family-owned cattle ranch.
Now what is he thinking about the 2 years left on his lease?
Now he probably wants to assign the entire remaining term of
the lease to an Assignee who will replace Husker as the Tenant under the original
lease.
