Assignment and subletting are the two mechanisms by which a commercial tenant transfers its interest in leased premises to a third party. In an assignment, the tenant transfers its entire remaining leasehold interest (all rights and obligations under the lease) to the assignee; the original tenant typically remains secondarily liable unless released by the landlord.
In a sublease, the tenant retains its direct relationship with the landlord, creates a new landlord-tenant relationship between itself and the subtenant, and remains fully liable to the landlord for all obligations under the head lease including rent and maintenance; the subtenant has no direct obligation to the head landlord and cannot enforce the head lease directly. The distinction matters both economically (the assignment price or sublease premium reflects different levels of risk and commitment) and legally, because the original tenant's continuing liability after an assignment is often the central commercial issue in consent negotiations.
Most commercial leases require the landlord's consent before the tenant may assign or sublet, and the terms of that consent clause (what standard applies to the landlord's discretion) are heavily negotiated. A consent clause that grants the landlord sole and absolute discretion allows the landlord to withhold consent for any reason or no reason, effectively giving the landlord a veto over any disposition of the lease.
A clause requiring that consent not be unreasonably withheld limits the landlord to objecting on commercially reasonable grounds: the proposed assignee's financial strength, the nature of the use, the potential impact on other tenants, or the proposed modifications to the premises. Some jurisdictions impose a reasonableness standard by statute even where the lease is silent, and the common law has developed a body of cases defining what reasons are reasonable and unreasonable.
Negotiating a defined list of reasonable grounds for refusal, rather than leaving it to the common law, gives both parties greater predictability.
Recapture rights are one of the most landlord-favorable tools in assignment and subletting provisions. A recapture clause gives the landlord the right, upon receiving an assignment or subletting request, to terminate the lease (or recapture the specific portion of the premises that the tenant seeks to sublet) instead of consenting.
Recapture is particularly common in retail leases where the landlord's primary interest is in controlling tenant mix and occupancy. A tenant seeking to sublet excess space at above-market rent to monetize a favorable lease faces the risk that the landlord will recapture the space, lease it directly at market rent, and eliminate the sublease premium, capturing for itself the value that the below-market lease represents.
For tenants negotiating new leases, limiting or eliminating recapture rights, or conditioning recapture on the landlord paying the tenant the present value of the sublease premium, is a priority if there is any expectation of future assignment or subletting activity.
Assignment provisions intersect with mergers, acquisitions, and corporate restructurings in ways that create significant transactional risk. A change-of-control clause, which treats a merger, acquisition, or significant ownership change as a deemed assignment requiring consent, can give a landlord leverage over an M&A transaction that the acquirer did not anticipate and the seller did not disclose adequately.
In acquisition due diligence, reviewing every material lease for assignment and change-of-control provisions is standard practice; failing to identify a landlord consent requirement on a critical facility lease can result in the landlord using the consent process to extract concessions (rent increases, lease extensions, personal guaranties) as the price of cooperation. Sophisticated buyers structure acquisition transactions to minimize deemed assignment triggers through carve-outs for intra-group transfers, public company mergers, and transfers to affiliates; these carve-outs are negotiated at lease origination and are not available as a remedy after the fact.