Whether for residential or commercial premises, the landlords and tenants should understand the terms of leases clearly. The difference between assignment and sublease is not subtle, yet many get confused when understanding these contracts.
Lease contracts or lease agreements are types of agreements that typically occur between the lessor and lessee. Here, the lessor is the landlord, and the lessee is the tenant or the party that is involved in an agreement. Leases may be conducted regarding both residential or commercial areas, and they can be either verbal or written. Although, it’s always a good decision to make written documents to avoid any unexpected fraud.
Lease agreements basically contain the terms and conditions for parties that are involved in it. The length of the contract period, the rent, the property safety concerns, etc., all are mentioned in the contract. So, when two parties agree on the terms of agreements, they both are obliged to obey those terms. Broadly speaking, a lease is a contract that officially confirms a tenant’s legal right to possess in the lessor’s property.
When we say an assignment of lease, it generally refers to an agreement (or terms) under which the tenant has the right to transfer the primary lease completely to another new tenant (If the primary lease contract doesn’t prohibit it). But under a sublease contract, it’s the tenant who acts as the landlord and gives access to a new tenant (or a sublessee) for a certain period of time under the primary lease contract.
Let’s proceed further to understand these two types of leases and the difference between them.
Table of Contents
|Definition||Complete transfer of the primary lease||Lease between sublessor and sublessee within the terms and conditions of the primary lease|
|Property||The entire leased property||Entire or a part of the property|
|Rental rate||According to the primary lease||According to the mutual agreement of the sublessor and sublessee|
|Pay to||The new tenant will pay the rent directly to the landlord||The sublessee will pay the rent to the sublessor|
|Dealing||The landlord is directly involved||Usually happens between the current tenant and sublessee (the landlord’s involvement is not necessary but the sublessor needs to notify the landlord)|
|Liability||The current tenant will not be responsible for any future issue after the dealing||The sublessor will be responsible for any future issue regarding the leased property|
What is an assignment of the lease?
When a lessee (business or individual) wants to get out of the possessed premise before the primary lease expires, the best option, in that case, is doing an assignment of lease. It’s a legal document that allows the tenant to transfer the lease to a new tenant with the consent of the landlord.
For example, if a business that made a one-year contract with a landlord and, after 7 months, business stops working, that tenant can still manage not to pay the rent for the remaining 5 months by assigning the lease. The document that allows the transfer process is known as the assignment of lease.
Generally, under the lease contract assignment, the landlord allows the tenant (that wants to move away) to get a new tenant and transfer the current lease to the new party. So, technically and legally, the current tenant releases itself from any future liabilities regarding the premise of the landlord.
Process of assignment of lease
The process of assignment of lease requires three parties: the landlord, the tenant (or the assignor), and the new tenant (or the assignee). First of all, if the assignor wants to assign a new tenant, they must get written permission from the landlord to do the assignment of lease. But if the primary contract doesn’t have any prohibition, the assignor is free to do it.
The whole legal process is done by the solicitors assigned from each party, one from the landlord, one from the assignor, and the other one from the assignee. The solicitor of the assignor will legally contact the solicitor of the landlord to propose the lease to ask for the landlord’s permission.
At the next stage, the landlord’s solicitor will take the willingness of the landlord whether they are willing to give the permission or not. Then the solicitor will gather information from the assignor if the new assignee is reliable enough to transfer the lease or not and assess the new assignee’s bank solvency.
After receiving satisfactory references, the landlord’s solicitor will draft some documents like a license to assign, authorized guarantee agreement, rent deposit deed, etc. These documents will then be sent to the assignor, and the assignor will pass these documents to the assignee. That’s how typically the entire assignment of the lease process works. However, this process may vary based on state laws and situations.
What is a sublease?
A sublease is the process of renting out a premise to a new party by the tenant for a particular period under the existing lease agreement between the landlord and the current tenant. Here the tenant acts like the landlord, and to assign a sublease, the tenant usually doesn’t have to take any legal contract with the landlord. The sublease contract occurs between the tenant (or sublessor) and the new tenant (or sublessee).
Suppose a tenant pays $1000 per month to the landlord according to the existing tenancy contract, and now he thinks a specific part of his possessed premise is not necessary for him to use. In that situation, he may leave a particular part of the possessed property and permit a new tenant for a certain amount of money. This monetary deal has nothing to do with the landlord. The tenant will always pay the rent to the landlord according to the primary contract. So in this process, he may make some extra bucks too.
Two things to be noticed carefully here: the sublessor cannot allow anything to the sublessee that violates the contract with the landlord, and most importantly, the sublessor will be responsible for any damage to the property done by the sublessee.
Process of subleasing
Subleasing follows a few steps. Before subletting, one has to make sure first whether the primary lease (with the landlord) allows it or not. If the tenant lease agreement restricts doing it, the tenant either won’t be able to do it or has to get permission from the landlord to allow a sublessee in the leased premise.
However, the most crucial factor for a tenant before allowing a sublessee is to confirm that the subtenant is the best choice. Determining the choice depends on a few factors like the solvency, and background of the sublessee, etc.
Next, the tenant needs to check out the basic lease agreement thoroughly whether the lease restricts it to do it or not. If the lease allows subletting, the current tenant will notify the landlord about the willingness of assigning a sublessee.
After confirming all these crucial tasks, now the tenant is free to sign the sublease agreement with the subtenant.
The key differences assignment and sublease
- Assignment of lease is a contract that allows the tenant to transfer the entire lease agreement to a new tenant. On the other hand, a sublease is a contract that enables the tenant to assign a subtenant in the possessed premise for a particular period.
- Assignment of lease transfers the entire property to a new tenant. Sublease allows a part of the property or the whole property both to the sublessee.
- The rent amount follows the primary contract in an assignment of lease. But, in a sublease, the rent follows the sublease contract.
- The assignor directly pays the rent to the landlord, while a sublessee pays the rent to the sublessor.
- The assignment of lease requires direct involvement of the landlord, assignor, and assignee. Contrarily, the sublease requires the direct participation of the sublessor and the subtenant.
- The new tenant is entirely responsible for any future issues regarding tenancy according to the assignment of lease. In the sublease, the sublessor is directly accountable for any future damage or harm or any issue in the possessed property conducted by the sublessee.
- Assignments of leases are always written. Subleasing can either be written or verbal.
The difference between assign, license, and sublease
The main difference between assign and license is that when you assign, you transfer the entire interest of the property to the assignee, but when it comes to licensing, the licensor keeps an interest in the licensed property.
Another difference between license and assignment is that the license can be done verbally or in written format. But it’s necessary to do a written agreement in the assignment of lease.
However, the difference between sublease and license is that the sublease grants a sublessee the right to occupy the tenant’s leased property. But a license only allows an individual or party the permission to use the leased property for a specific purpose.
Frequently asked questions
What is the difference between lease and license?
Unlike a lease, a License is conducted personally between two parties. It’s basically a verbal or written agreement to occupy a property. License is considered less secure for the tenure and favors the licensor more. On the other side, Leases can occur between commercial and residential stages. Leases are written, secure, and assert clear terms of agreements. For that, a lease has fewer chances of frauding and provides justice to both parties.
Can I write my own lease agreement?
Although a lease can either be written or verbal, it’s always safe to write them to avoid fraud. One may write his/her own lease agreement, but it’s always safe to assign a solicitor to do the lease. Following the real estate statutes is important when making a lease contract.
What are the 4 different types of leasing?
It is important for both parties to understand the types of leasing. There are four common types of leasing. The types are absolute net lease, full-service lease, modified gross lease, and triple net lease.
The terms of the lease need to be understood clearly to conduct the perfect agreement. For the convenience of both tenant and landlord, we have thoroughly discussed the difference between assignment and sublease in this article.
Janet is a high-school teacher and an assistant researcher in Idaho who graduated in history and took a master’s degree in library science. She loves spending time with kids and teaching them. Janet spends most of her nighttime researching various topics and writing on them.