This is my own general perspective on assignment and subletting provisions in California commercial leases, based on the agreements I review for business tenants. It is not legal advice and not a definitive statement of the law — every lease is drafted differently and the facts matter.
If there is any chance you will one day sell your business, the assignment clause in your lease is one of the most important provisions in it. In my experience most tenants do not look closely at it until a buyer is already at the table — which is precisely the moment when you have the least leverage to fix it.
The reason is simple. In most small business sales, the lease is a material part of what the buyer is purchasing. A restaurant, a medical office, a gym — the location often is the business. If your landlord can refuse to let the lease transfer, the landlord effectively holds a veto over your sale.
Consent standards, and the two words that matter
Almost every commercial lease says you cannot assign without the landlord’s consent. The critical question is what standard governs that consent.
The language I want to see is that consent shall not be unreasonably withheld, conditioned, or delayed. All three matter. “Withheld” alone leaves room for a landlord to grant consent while attaching conditions that make the deal impossible, or to simply sit on the request while your buyer loses patience.
A lease that says consent may be withheld in the landlord’s “sole and absolute discretion” is, in practical terms, a lease you may not be able to transfer. If I can only change one thing in an assignment clause, this is usually it.
Defining what counts as an assignment
This catches people. Many leases define a change in ownership of the tenant entity as an assignment — sometimes any transfer of a controlling interest, sometimes a much lower threshold. That means selling your company by stock or membership-interest transfer, rather than selling assets, can still trigger the consent requirement.
Where I can, I try to carve out transfers that do not really change who is running the business: transfers to an affiliate under common control, transfers for estate planning purposes, or an internal reorganization that does not change management. Landlords frequently accept these because their actual concern is operator quality, not paperwork.
Recapture and profit-sharing
Two provisions I read carefully because they can quietly gut the value of a sale.
A recapture right lets the landlord respond to your assignment request by terminating the lease and taking the space back instead of approving the transfer. In a rising market that is exactly what a landlord will do — your below-market space becomes theirs to re-let at today’s rent, and your buyer has nothing to buy. Where recapture cannot be removed entirely, I look to limit it to assignments of the whole premises for the whole remaining term, and to give the tenant a right to withdraw the request and keep the lease rather than be terminated.
Profit-sharing language gives the landlord some or all of any amount you receive above your rent. That can be defensible for a straight sublease at a markup. It is much harder to justify when it is drafted broadly enough to capture proceeds from selling your business, which reflect goodwill and equipment rather than the value of the space. I try to define the shared amount narrowly and to deduct the tenant’s transaction costs first.
Subletting is not the same thing
Assignment transfers the whole lease; subletting hands part or all of the space to someone else while you remain on the hook. Tenants sometimes assume that because they remain liable, the landlord should care less. In practice landlords often treat both the same, and it is worth negotiating a lighter consent standard for partial sublets — particularly if you might take more space than you need at the start and grow into it.
One point worth being clear-eyed about: after an assignment, you frequently remain liable anyway unless the lease releases you. If you sell the business and the buyer stops paying, the landlord may come back to you. Asking for a release on assignment — or at least a release once the assignee has performed for some period — is a reasonable request that most tenants never make.
Practical suggestions
Negotiate this clause at the letter of intent stage, before the lease is drafted around it. Ask what documentation the landlord will require from a proposed assignee and get that standard written down, so approval does not become a moving target. And check for a landlord consent fee — a reasonable cap on it is a small ask that prevents an open-ended charge at the worst possible moment.
If you are signing a lease and think you may sell the business one day, or you have a buyer now and are reading the assignment clause for the first time, call (310) 556-9692. Lease review is handled on an hourly or flat-fee basis, and I will scope it before starting.
Related reading: Personal guarantees in a commercial lease · CAM charges and what you actually pay · Commercial lease review and negotiation
As above, these are my observations and opinions rather than legal advice, and reading this does not create an attorney-client relationship.
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