Chapter § 34.2 PARTIES' RIGHTS ARISING FROM A LEASE ASSIGNMENT

• Jurisdiction: Oregon

§ 34.2 PARTIES' RIGHTS ARISING FROM A LEASE ASSIGNMENT

§ 34.2-1 Lease Assignments Generally

As discussed in § 34.1, a transfer of all a tenant's rights in a property for the entire duration of the tenant's interest, without retaining any intervening interest during that term, is an assignment. The transfer may relate to less than all the property covered by the master lease, but must include all of the rights that the tenant holds in the property being transferred for the duration of the tenant's original lease. If the assignor retains an intervening interest in the property, it will likely be interpreted as a sublease. See generally Landlord and Tenant, 49 Am Jur 2d §§ 917-918 (2006) (supplemented periodically). For example, if an assignor has an interest in 10 acres of property, with a remaining term of two years under the original lease, the assignor may make an assignment in all or only part of those 10 acres, as long as it retains no right to repossess or reenter the property assigned during the remaining two years. Thus, a conveyance of an assignor's entire interest in just one acre out of the 10, with no right to repossess or reenter, effects a valid assignment. But a conveyance of all 10 acres with a right to repossess or reenter the property before the end of the remaining two-year term is not an assignment, and is likely to be interpreted as a sublease or another type of transfer.

§ 34.2-1(a) Pro-Tanto Assignments

A conveyance of an assignor's entire interest in less than all of the property covered by the master lease (see § 34.2-1) creates what is commonly referred to as a pro-tanto assignment. Under this scenario, the landlord has two tenants, each with possession of separate legal estates, under a single-lease contract. This raises a multitude of vexing problems. For example, how does one tenant's breach of the lease affect the other tenant's rights under that same lease? If one tenant fails to pay rent, but the other remains current, can the landlord evict both tenants or is the landlord limited to only recovering half its property back? If one tenant wants to enter into a lease modification with the landlord, can the tenant do so without the other tenant's consent under the common lease? This area of law is unsettled, which makes the inclusion of comprehensive lease-transfer provisions in lease documents (see § 34.4) essential.

§ 34.2-1(b) Conditional Lease Assignments

Leadbetter v. Pewtherer, 61 Or 168, 171, 121 P 799 (1912), provides that when a party other than the original tenant takes possession of leased property and pays rent for the leased property, the law presumes the lease has been assigned to that third party absent evidence to the contrary. However, when a lease assignment is made conditioned upon the landlord's consent (i.e., a conditional-lease assignment), and the landlord does not in fact grant its consent, regardless of whether the proposed assignee has taken...