May the Landlord Unreasonably Withhold Consent to Assignment?
| Publication year | 1983 |
| Pages | 1631 |
1983, October, Pg. 1631. May the Landlord Unreasonably Withhold Consent to Assignment?
Lawyers are frequently requested to review leases(fn1) and advise their clients whether assignment or subleasing(fn2) is permitted and, if so, under what circumstances. Leases may be silent or may prohibit or restrict assignment and subleasing. Some leases require the landlord's prior consent to subleasing and assignment,(fn3) and others further provide that "such consent may not be unreasonably withheld."(fn4) More meticulously drafted leases may contain standards which, if met to the satisfaction of the landlord, require that consent to assignment or subleasing be granted.(fn5)
Landlords typically attempt to restrict assignment and subleasing to control who will be the occupant and to recover increased rent or obtain more advantageous lease provisions from a proposed assignee or sublessee. Admittedly, while these concerns may be in the landlord's best interest, they may contravene real property policies against forfeitures and restraints on alienation. This article focuses on Colorado law governing lease assignment and subleasing, and briefly considers trends in the law of other jurisdictions.(fn6)
In the absence of a lease provision prohibiting assignment, the lease, as a recognized interest in property, is freely assignable.(fn7) Presumably, the same principle would follow for subleasing.(fn8) Consequently, a tenant is free to assign or sublease in the event the lease is completely silent on assignment and subleasing or if the lease expressly permits assignment and subleasing. Care should be exercised, though, in the event a "silent" lease contains a restriction on the use of the leased premises, and the proposed assignee's or sublessee's use would violate this restriction. Such a breach of the use restriction could ultimately lead to forfeiture of the lease.(fn9)
Lease provisions restricting a tenant's right to assign or sublease have been addressed by Colorado courts. In Gordon Investment Co. v. Jones,(fn10) the Colorado Supreme Court considered a commercial lease containing conflicting assignment and subleasing provisions. One printed provision prohibited assignment and subleasing without the written consent of the landlord. Another typewritten paragraph permitted the tenant to assign the lease for the continuation of the same kind of business being conducted by the tenant.
At the outset, the court held that the typewritten permission to assign voided the prohibition against assignment without consent and constituted the binding provision of the lease concerning assignment. The printed restriction on subleasing, unchanged by the typewritten paragraph, was approved by the court as a restriction designed for the protection and benefit of the landlord. The court ruled under the facts of the case that subleasing of the leased premises had occurred without the landlord's written consent, thereby justifying termination of the lease. The subleasing had occurred without the landlord's knowledge and, apparently, the landlord's consent was not requested.(fn11)
Another early examination of restrictions on assignment and subleasing is Union Oil Co. v. Lindauer.(fn12) A farming and grazing lease prohibited (1) use of all or any part of the leased premises by other parties and (2) assignment and subleasing without the prior written consent of the landlord. When the landlord discovered that the tenant had permitted use of the leased premises by third parties, constituting a subleasing,
In reversing the trial court, the Colorado Supreme Court ruled:
The law gives the lessor the right to impose restrictions in the lease on the right to assign or sublet the leased premises, and these restriction [sic] may be enforced by forfeiture of the lease and reentry.(fn13)
Given the express restriction on assignment and subleasing and the express remedy, in the landlord's option, to terminate the lease upon a violation of any lease terms, the court rationalized that a termination of the lease and reentry was justified.(fn14)
More recently and significantly, the Colorado Court of Appeals, in Carleno v. Vollmert Tire Co.,(fn15) evaluated a commercial lease permitting assignment and subleasing upon obtaining the landlord's prior written consent. The lease further provided that any assignment or subleasing was to be made to a person of good reputation and character and that use of the premises was not to be offensive or damaging to the building.
Plaintiff's predecessor-in-interest owned a building and leased a majority of it to the defendant who sold motorcycles on the leased premises. The lease contained an option to purchase in favor of the defendant. Defendant desired to sell the business, but to retain the option to purchase, and sought the owner's consent to an assignment of the lease. The owner refused to consent, but met with the proposed purchaser of the motorcycle business and expressed a...
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