§ 31.01 Introduction

• Jurisdiction: United States
• Publication year: 2022

§ 31.01 Introduction¹

At common law, a lease was considered to be a conveyance in property and thus subject to property law principles.² Under this approach, the tenant held an interest in the property and was responsible for the rents and other obligations for the full term of the lease.³ A declining majority of states use the conveyance approach in resolving disputes between landlords and tenants. Under the common law approach, a landlord may arbitrarily and unreasonably withhold consent under an unqualified provision in the lease prohibiting assignment or subletting of the leased premises without the landlord's consent.⁴ The rationale for this approach is that restrictive covenants against assignment or subletting the leased premises during the term of the lease is a positive indication that the landlord wanted to reserve to himself the right to choose his own tenant, a right which to him might be of great significance or consequence.⁵ Such a right would be of no value if the landlord were duty bound to accept a subtenant selected by the tenant for the balance of the unexpired term of the lease.⁶ Furthermore, a commercial tenant wishing to soften the effect of this unilateral control can demand to have engrafted on the consent provision "which consent shall not be withheld unreasonably."⁷

In some common law states where the issue of whether a landlord may arbitrarily and unreasonably withhold consent under an unqualified provision in the lease prohibiting assignment or subletting of the leased premises without the landlord's consent has not been litigated, courts have held that the landlord may arbitrarily refuse consent on the theory that the landlord is under no duty to mitigate damages.⁸ Since the landlord is under no duty to mitigate damages, he may arbitrarily reject a suitable subtenant, sit back and allow the leased premises to remain vacant, and hold the defaulting tenant liable for the entire rent under the lease.⁹

A strong and increasing minority of states regard the lease as a contract and subject to the general contract principles.¹⁰ The minority rule, applying different contract principles, prohibits a landlord from arbitrarily withholding consent under an unqualified provision in the lease prohibiting assignment or subletting of the leased premises without the landlord's consent.¹¹ The rationale for the minority rule is largely based on the contract principles. First, every contract has an implied covenant of good faith and fair...