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Commercial Lease Assignments and Subleases in a Volatile Market: Key Considerations, Potential Pitfalls

Weighing Risks vs. Benefits; Clearly Defining Future Rights in the Master Lease; Drafting Strategies for Subleases/Assignments

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, September 28, 2023

Recorded event now available

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This CLE webinar will provide key considerations for counsel to landlords and tenants when drafting subleasing and assignment clauses in the master lease which will govern their clients' future rights and obligations under subsequent agreements. The panel will also discuss the benefits and risks of assignment and subleasing, especially in a volatile market, and provide best practices for drafting subleases and/or assignment agreements.

Description

In a volatile post-pandemic commercial real estate market, counsel to parties negotiating long-term commercial leases should pay close attention to the assignment and subleasing clauses in the master lease in case the tenant's business needs change--where they may no longer need the amount of space they've leased or may not be able to afford to pay for the space--while still tied to the lease. Subleasing or assigning a lease may provide the best options for both the landlord and tenant.

Counsel and their clients run into trouble when they rely on boilerplate language for subleasing or assignment clauses in the master lease that governs the parties' future rights to do either. Therefore, counsel for all parties should understand the key differences between subleasing and assignment, as well as drafting considerations and legal pitfalls, so they can best protect their clients' future interests.

When later making the decision whether to sublease or assign a commercial lease, landlords, tenants, subtenants, and/or assignees, governed by the parameters of the master lease, must analyze the advantages and risks of both options while understanding there are implications for all parties involved under tax and bankruptcy codes, contract law, landlord-tenant law, and financial reporting requirements.

Listen as our panel discusses key considerations for landlords and tenants when drafting subleasing and assignment clauses in the master lease, especially given the current market. The panel will also review the benefits and risks of commercial lease assignments and subleases and provide additional drafting strategies for subleases and/or assignment agreements.

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Outline

  1. Assignment vs. subleasing
    1. Key differences
    2. Risks and benefits for landlords
    3. Risks and benefits for tenants
    4. Risks and benefits for assignees and subtenants
  2. Master lease drafting considerations and pitfalls
    1. Assignment clauses
    2. Sublease clauses
    3. State law considerations
    4. Contemplating interaction with future assignment/sublease agreements
  3. Sublease drafting considerations and pitfalls
  4. Assignment agreement drafting considerations and pitfalls

Benefits

The panel will review these and other important issues:

  • What are the key considerations and pitfalls when drafting subleasing and assignment clauses in a master lease?
  • How do the subleasing and assignment terms in the master lease affect future sublease or assignment agreements?
  • What are the benefits and risks of assignment as compared to subleasing for landlords, tenants, subtenants, and assignees?
  • What are key considerations and pitfalls when drafting a sublease and/or assignment agreement?
  • Are there additional drafting considerations in a volatile commercial real estate market?

Faculty

Rivera, Oscar
Oscar R. Rivera

Managing Shareholder
Siegfried Rivera

Mr. Rivera’s practice focuses on real property and corporate law, representing numerous developers, investment...  |  Read More

Weltman, Jeremy
Jeremy Y. Weltman

Shareholder
Ruberto Israel & Weiner

Mr. Weltman's wide-reaching litigation practice focuses on finding successful resolutions to his clients' legal...  |  Read More

Zana, Lisa
Lisa M. Zana

Partner
Shipman & Goodwin

Ms. Zana’s commercial real estate clients are situated throughout the U.S. with a focus on New York’s...  |  Read More

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