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Q&A – Commercial Real Estate Leasing – Assignment, Financing, and Transfers

By:  Alejandro E. Jordan, Esq.img_2262

Q.  DESCRIBE ANY LAWS ALLOWING THE TENANT TO ASSIGN ITS LEASE, OR SUBLEASE ITS PREMISES, WITHOUT THE LANDLORD’S CONSENT. IS A REASONABLENESS STANDARD IMPLIED WHEN THE LEASE IS SILENT ON WHETHER THE LANDLORD’S CONSENT TO AN ASSIGNMENT OR SUBLEASE MAY BE REASONABLY OR UNREASONABLY WITHHELD?

Under Florida law, the tenant may assign its lease or sublease its premises without the landlord’s consent if the lease is silent on assignments and subleases (Frissell v. Nichols, 114 So. 431, 434 (Fla. 1927)). If a lease requires the landlord’s consent to an assignment but is silent on the standard for the landlord’s consent, then an implied term is that landlord’s consent will not be unreasonably withheld and is subject to an implied covenant of good faith (Fernandez v. Vazquez, 397 So. 2d 1171, 1174 (Fla. 3d DCA 1981)). As a result, and because of concerns that criteria other than the ability to pay rent may not be considered in determining whether consent is reasonably required, it is expected commercial practice to include criteria for the granting or withholding of consent in a commercial lease.

Q.  IF THE LEASE DOES NOT EXPRESSLY DEFINE THE TERM “ASSIGNMENT” AND THERE IS NO OTHER EXPRESS RESTRICTION IN THE LEASE TO THE CONTRARY CAN THE:

  • Tenant’s corporate ownership interests be freely transferred without the landlord’s consent?

  • Tenant freely place a lien on its leasehold interest, or pledge its corporate ownership interests, in connection with a financing without the landlord’s consent?

Transfer of Ownership Interests

If the lease does not expressly define the term “assignment” and there is no other express restriction in the lease to the contrary, the tenant’s corporate ownership interests may be transferred without the landlord’s consent under Florida law.

Security Lien or Pledge of Ownership Interests

If the lease does not expressly define the term “assignment” and there is no other express restriction in the lease to the contrary, the tenant may place a lien on its leasehold interest, or pledge its corporate ownership interests, in connection with a financing without the landlord’s consent.

Unless it is expressly waived, a landlord has a statutory lien on all of the tenant’s personal property found either on or off the premises leased or rented. This statutory landlord lien is superior to any lien acquired after the bringing of the property on the premises leased, subject to the rights of those providing purchase money financing and any tenant bankruptcy. (§ 83.08, Fla. Stat.)

Q.  WHEN A LEASE REQUIRES A LANDLORD’S CONSENT FOR AN ASSIGNMENT AND DEFINES THE TERM “ASSIGNMENT” TO INCLUDE A TRANSFER OF THE TENANT’S CORPORATE OWNERSHIP INTERESTS, WOULD AN INDIRECT TRANSFER OF THE TENANT’S INTERESTS TRIGGER THE LANDLORD’S CONSENT REQUIREMENT?

Whether an indirect transfer of the tenant’s ownership interests would trigger the landlord’s consent requirement depends on the actual language of the lease.

Q. IS THE TENANT/ASSIGNOR DEEMED RELEASED FROM FUTURE LIABILITY UNDER THE LEASE WHEN THE LEASE IS SILENT ON WHETHER THE ORIGINAL TENANT WILL BE RELEASED IN THE EVENT OF AN ASSIGNMENT?

In general, without an express release, Florida tenants who assign their leasehold interests are not relieved of their obligations under the lease.

Q.  DESCRIBE ANY RESTRICTIONS ON THE LANDLORD’S ABILITY TO TRANSFER THE REAL PROPERTY SUBJECT TO THE LEASE. DOES THIS TRANSFER AFFECT THE TENANT’S RIGHTS OR OBLIGATIONS?

Unless expressly stated in the lease, and except for certain exceptions relating to foreclosure actions, under Florida law a purchaser of the real property takes title to the real property acquired, subject to then existing leases.

JordanLawyers-ICON-Dark-241x300About the Author

Jordan + Lawyers law firm has over 20 years’ experience as advisors to foreign national and domestic real estate investors, real estate owners and tenants, developers, real estate investment companies, and ultra-affluent high net worth individuals. If you have any questions on whether a particular a commercial real estate transaction is right for you, need assistance in leasing or in analyzing due diligence on a particular opportunity, contact us at 305-501-2836 or visit us at www.JordanLawyers.law for immediate assistance.  Our offices are conveniently located in Miami, Florida (Coral Gables), and service clients throughout the State of Florida.

 

 

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