§ 31.01A Transfer Clauses

• Jurisdiction: United States
• Publication year: 2022

§ 31.01A Transfer Clauses

When evaluating a refusal to consent to a transfer, the fundamental standard is whether the landlord has demonstrated reasonable grounds under the specific circumstances for withholding or conditioning consent. It is up to the trier of fact to determine what constitutes reasonable grounds for refusing consent based on the evidence presented.¹ Courts have been consistent in not allowing a landlord's refusal to consent to a transfer to stand if it was based on an arbitrary rationale² or on personal taste, sensibility or convenience.³ Most decisions place the burden on the tenant to show that the landlord acted unreasonably. Additionally, the tenant is responsible for furnishing information to the landlord to show that the proposed subtenant is acceptable. The landlord is not required to ask the tenant for information favorable to the subtenant in making its decision.⁴ However, landlords are required to act in a timely manner; a landlord's unreasonable delay in giving consent is tantamount to a withholding.⁵

The objective standards for determining reasonableness, which was first enunciated in the American Book Co. case,⁶ have been repeatedly reaffirmed in later cases.⁷ These standards go to the financial responsibility of the proposed subtenant; the "identity" or "business character" of the subtenant or its suitability to a particular building; issues regarding whether the landlord has been someone with whom the landlord has been involved in legal disputes if the proposed subtenant is already a tenant in the building; whether the subtenant would impose an additional burden on the landlord by needing more parking area, elevator requirements or additional alterations of the premises.⁸

A landlord's imposed subjective standards have usually failed the "reasonableness" tests. These standards generally have fallen into categories where the landlord stands to gain an economic advantage over what was bargained for in the lease;⁹ refusal based on the personal taste of the landlord; requiring the tenant to pay the landlord the excess rent over the prime lease (unless this has already been agreed to in the prime lease); requiring the sublease rent not be less than the market rent of the building and payment by the tenant of a fee unrelated to economic risk.¹⁰ These subjective standards also include refusing to consent because the proposed subtenant was already a tenant in another building owned by the landlord¹¹ and, refusing consent to...