Assignment vs. Sublease

In the absence of some prohibition in the lease agreement, a tenant may freely transfer the leasehold interest in whole or in part.

Assignment

If the tenant transfers the entire remaining interest under the lease, an assignment has taken place. For example, a tenant had two years left on a five-year lease. The tenant transferred all of those remaining two years to a second tenant, thereby accomplishing an assignment. Under an assignment:

• The landlord and the second tenant enjoy a legal relationship, and are responsible to each other for the promises contained in the original lease pertaining to the premises.
• The landlord and the original tenant continue, however, to be secondarily responsible to each other, since they were the ones who had originally exchanged those promissory words in the lease.

Sublease

A sublease arises when the original tenant transfers less than the tenant’s full interest under the lease. For example, the tenant with two years remaining on their lease transfers the entitlement to the premises for the months of June and July to a second tenant. This is a sublease. Under a sublease arrangement:

• The landlord and the second tenant share no legal relationship.
• The connection between landlord and the original tenant remains undisturbed.
• However, the original tenant is now responsible to the second tenant, and vice-versa.