512: Listen and Learn -- Landlord/Tenant Law (Part 2) - Assignments and Subletting

Welcome back to the Law School Toolbox podcast! This is the second part of our discussion on landlord/tenant law. In this episode, we focus on the differences between lease assignment and subletting.

In this episode we discuss:

• Assignment of a lease
• Subletting a property
• A sample question illustrating the concept of lease assignment

Resources:

• "Listen and Learn" series (https://lawschooltoolbox.com/law-school-toolbox-podcast-substantive-law-topics/#listen-learn)
• California Bar Examination – Essay Questions and Selected Answers, February 2015 (https://www.calbar.ca.gov/Portals/0/documents/admissions/gbx/Feb2015_CBXSelectedAnswers_EssayQuestions1-6_R.pdf)
• Podcast Episode 511: Listen and Learn – Landlord/Tenant Law (Part 1) (https://lawschooltoolbox.com/podcast-episode-511-listen-and-learn-landlord-tenant-law-part-1/)

Download the Transcript 
(https://lawschooltoolbox.com/episode-512-listen-and-learn-landlord-tenant-law-part-2/)

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Thanks for listening!

Alison & Lee

Episode Transcript

Lee Burgess (00:02):
Welcome back to the Law School Toolbox podcast.
Today, we have another episode ofour “Listen and Learn” series – this
one discussing leaseholds . YourLaw School Toolbox hosts are Alison
Monahan and Lee Burgess, that's me.
We are here to demystify the lawschool and early legal career
experience, so you'll be the bestlaw student and lawyer you can be.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox and the

(00:24):
career-related website CareerDicta.
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, pleaseleave a review or rating on
your favorite listening app.
And if you have any questions,don't hesitate to reach out to us.
You can reach us via the contactform on LawSchoolToolbox.com,
and we'd love to hear from you.
And with that, let's get started.

(00:51):
We are going to talk aboutassignment and subletting today.
Unless the specific language of alease agreement states otherwise,
leases can generally be freelyassigned or sublet to third parties.
It can often be challenging for studentsto distinguish between an assignment and
a sublet when facing a landlord/tenantproblem, so we are going to walk

(01:12):
through each of these topics in turn andhighlight the differences between them.
An assignment is the complete transferof the rights and obligations under the
lease agreement by one party - called theassignor, to another party - the assignee,
for the remainder of the lease term.
This is usually going to be a situationwhere a tenant is moving or otherwise

(01:33):
not intending to live at the propertyfor the remainder of the lease.
So, they are assigning the leaseto another tenant for however
long is left under that lease.
The assignment must be under thesame terms as the original lease.
The only exception is the assignormay reserve the right to terminate
the assignment for the breach ofany lease term by the assignee.

(01:57):
An assignee essentially standsin the shoes of the assignor.
So, they have a direct relationshipwith the landlord, which is
called privity of estate.
They pay the landlord rent directly.
Because they are in privity of estatewith the landlord, they are liable to
the landlord for the rent and for allother covenants in the lease agreement.

(02:20):
Now, what about the assignor's liability?
The assignor is no longer in possessionof the leased premises, so their
privity of estate with the landlordterminates with the assignment.
However, the assignor still remainsin privity of contract with the
landlord, as they were both partiesto the original lease agreement.

(02:40):
So, the assignor remains liable forthe rent and all other covenants in
the lease for the remainder of thelease period, unless the landlord
releases them from that liability.
Thus far, we focused on assignmentfrom one tenant to another.
However, a landlord may assigntheir rights and obligations

(03:00):
under the lease as well.
This typically occurs when the landlordtransfers their ownership interest
in the property to a third party.
The tenant will then be obligated topay rent to the assignee-landlord.
Both the tenant and the assignee-landlord will also be liable to each other
for all other covenants in the lease.

(03:23):
Okay, now that we've addressedassignment, let's look at subletting.
A sublease is the transfer of the rightof possession held by one party - called
the sublessor, to another party - thesublessee, for a specific period of time.
This typically arises whenthe tenant is going to be away
for a short period of time.

(03:44):
For example, a law student may enterinto a one-year lease agreement for
an apartment near their law school,but then get the opportunity to take
a summer internship out of state.
They could sublet their apartmentto someone for the summer, then take
the lease back at the end of thesummer when they return to school.
The sublessee is considered tobe a tenant of the sublessor.

(04:07):
So, they do not have a directrelationship with the landlord.
They pay rent to the sublessor,and the sublessor in turns
pays the rent to the landlord.
Because the sublessee does not have adirect relationship with the landlord,
they will not be personally liable tothe landlord for rent or performance
of any other provision under the lease.

(04:28):
The sublessor remainsliable to the landlord.
So, if the sublessee fails to pay rent,the sublessor will still need to pay the
landlord, or they will be in violationof their lease, even though they are
not presently living at the property.
How do we feel aboutassignments and sublets?
This is definitely complicated stuff.

(04:49):
Let's look at a hypotheticaltogether to see if we can really
nail down these topics together.
This hypothetical is pulled from Question2 of the February 2015 California bar
exam, but we've tweaked it a bit to focuson the issue of assignment and subleases:
" David entered into a valid 15-yearlease of Blackacre with Ellen.

(05:10):
The lease included a promise by Ellenon behalf of herself, her assigns,
and successors in interest, to, [1]obtain hazard insurance that would
cover any damage to the property; and[2] use any payments for damage to the
property only to repair such damage.
Five years later, Ellentransferred all of her remaining

(05:32):
interest in Blackacre to Fred.
Neither Ellen nor Fred ever obtainedhazard insurance covering Blackacre.
While Fred was in possession of Blackacre,a building on the property was destroyed
by fire due to a lightning strike.
David has sued Ellen and Fred fordamages for breach of the covenant
requiring hazard insurance for Blackacre.

(05:53):
Is David likely to prevail?"
What do we think about this hypothetical?
Is David able to sue bothEllen and Fred for breach of
the hazard insurance covenant?
Well, that's likely going to depend onwhether this is an assignment or a sublet.
So let's make that determination together.

(06:14):
Remember, a sublet is a transfer of theleased property for a period of time.
An assignment, on the other hand,is a transfer of the leased property
for the remainder of the lease.
What did Ellen transfer to Fred?
She transferred all of her remaininginterest in Blackacre to Fred.
So, she's transferred the leased propertyto Fred for the rest of the lease period.

(06:38):
That means Ellen hasassigned the lease to Fred.
With an assignment, Fred is going to stepinto Ellen's shoes and will have a direct
relationship with David, the landlord.
So, Fred is in privity of estatewith David and will be liable to
David for all covenants in the lease.
What about Ellen?
Can David sue her as well?
He sure can.

(06:59):
Even though Ellen has assigned herremaining interest in Blackacre to
Fred, she still remains in privity ofcontract with David because she is a
party to the original lease agreement.
Therefore, she still remains liablefor all obligations under the lease.
Since both Fred and Ellen are liable toDavid for all covenants in the lease,
David will likely be successful inhis suit against them for breaching

(07:22):
the covenant to hold hazard insurance.
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(07:42):
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Thanks for listening, and we'll talk soon!