§17.11 - Transfers of Interest by Landlord or Tenant

• Jurisdiction: Washington

§17.11TRANSFERS OF INTEREST BY LANDLORD OR TENANT

Because each of the landlord and tenant has an estate in land, a reversion and a leasehold, respectively, each has an interest that is capable of being transferred to some third person.

(1) Transfers by tenant

There are two sorts of transfers by a tenant: assignment and sublease. In general, an assignment is a transfer of the full balance of the tenant's term with respect to all or a part of the leased premises, while a sublease is a transfer of the right of possession for a period less than the full balance of the term. A tenant may freely assign or sublet as long as no covenant in the lease prohibits the transfer. See Cupples v. Level, 54 Wash. 299, 103 P. 430 (1909). Some states have statutes requiring the landlord's consent to transfers. 1 AMERICAN LAW OF PROPERTY §3.56 (A. James Casner ed., 1952). The only such Washington statute is the Mobile Home Landlord-Tenant Act, Chapter 59.20 RCW. However, when the tenant pays rent as crop shares or a percentage of sales, so that the landlord is dependent upon the skills of this particular tenant, a covenant not to assign without the landlord's consent might be implied. Lloyd v. Woods, 165 Wash. 541, 5 P.2d 1000 (1931), contains what seems an alternative holding that a farm lease on crop rents was impliedly not assignable without consent. Other jurisdictions have decided that leases calling for rent payable as a percentage of the tenant's sales are not assignable without consent. 1 AMERICAN LAW OF PROPERTY §3.56 (A. James Casner ed., 1952).

The Mobile Home Landlord-Tenant Act contains special provisions governing the assignment of leaseholds of mobile home lots. The landlord is forbidden to require removal of the tenant's mobile home from the landlord's lot in the event the tenant sells the home. RCW 59.20.070(1). The tenant must notify the landlord of sale of the mobile home at least 15 days before the sale. The landlord must, at least seven days before the sale, approve or disapprove assignment of the space lease "on the same basis that the landlord approves or disapproves of any new tenant," but may not unreasonably withhold consent. RCW 59.20.073.

The essence of an assignment or sublease is that the tenant manifests its intent to transfer to another its tenancy in all or part of the premises for all or part of the balance of his term. Except as may be required to satisfy the statute of frauds, no particular form of transfer is required. A tenant may assign informally by allowing another to assume possession of the premises for the balance of the term. Worthington v. Moreland Motor Truck Co., 140 Wash. 528, 250 P. 30 (1926). The tenant who is a natural person cannot assign to himself or to a corporation that is merely the tenant's alter ego, although there is Washington dictum that a tenant might assign to a worthless corporation or person. Nat'l Bank of Commerce v. Dunn, 194 Wash. 472, 78 P.2d 535 (1938). The assignee must be a person legally capable of holding a leasehold and must consent to the transfer. Frye v. Hill, 14 Wash. 83, 43 P. 1097 (1896).

If the arrangement is one in which the third party uses the land only to assist the tenant in carrying out its business, no assignment or sublease occurs. Thus there is no transfer when the third person works land on crop shares, pastures cattle there, or manages and operates the tenant's business. Lindley v. De la Pole, 131 Wash. 657, 230 P. 851 (1924) (crops); Golden v. Mount, 32 Wn.2d 653, 203 P.2d 667 (1949) (cattle); Chopot v. Foster, 51 Wn.2d 406, 318 P.2d 976 (1957) (business); see also Barnes v. Standard Oil Co. of Cal., 167 Wash. 609, 9 P.2d 1095 (1932) (no assignment when third person possesses jointly with tenant). But if the arrangement actually amounts to a transfer of legal possession, then the court has looked through form to find that an assignment has occurred. Examples are arrangements that superficially appeared to be management contracts or powers of attorney but in reality put the transferee in full possession for the balance of the original tenant's term. Bedgisoff v. Morgan, 23 Wn.2d 737, 162 P.2d 238 (1945) (management contract); Guill v. K. Enomoto, 117 Wash. 575, 201 P. 910 (1921) (power of attorney).

There is a split in Washington cases on the question whether an assignment must meet the statute of frauds. In two older cases the courts have held that an assignment need not be acknowledged, even if the leasehold has several years left to run. Cravens v. Cravens, 136 Wash. 126, 238 P. 901 (1925); Am. Sav. Bank & Trust Co. v. Mafridge, 60 Wash. 180, 110 P. 1015 (1910). Other opinions contain strong dicta to the same effect. Myers v. Arthur, 135 Wash. 583, 238 P. 899 (1925) (dictum); Tibbals v. Iffland, 10 Wash. 451, 39 P. 102 (1895) (the dictum that started it all). None of these decisions appears formally to have been overruled. But in two subsequent decisions, Geyen v. Time Oil Co., 46 Wn.2d 457, 282 P.2d 287 (1955), and Mobley v. Harkins, 14 Wn.2d 276, 128 P.2d 289 (1942), the courts imply very strongly, if they do not hold, that an assignment must be acknowledged if the lease is for over a year and has to be acknowledged. In both of these cases, the unacknowledged assignments were taken out of the statute of frauds by acts of the assignees. Other jurisdictions generally require an assignment to be in writing if the balance of the term is long enough so that a lease of that length would have to be written. 1 AMERICAN LAW OF PROPERTY §3.56 (A. James Casner ed., 1952). RCW 65.08.060 and .070 require, as against third persons, that the assignment of every "lease for a term" over two years shall be recorded, which implies acknowledgment. Cf. Tibbals v. Iffland, 10 Wash. 451 (case decided prior to statute; holding no recording was required). It is not clear whether "term" of the lease refers to its original or remaining term.

Practice Tip: Putting together all the foregoing discussion, it seems a written assignment should be used if the original lease had to be written, and an acknowledged assignment if the lease had to be acknowledged, regardless of how long the term has yet to run Otherwise, an assignment may be oral.

No authority has been found on the required form of a sublease. Because the sublease is actually a new lease between the head tenant and its subtenant, it would seem that it would have to be executed with the same formality, written or acknowledged, as would a principal lease for the same term. It might be argued that, because the sublease is created out of the head lease, the latter being a chattel real and not realty, the real property statutes of frauds do not apply. The question is untested, and the cautious approach is to execute the sublease with all the formalities required for a principal lease of the same term.

(a) Assignment and sublease distinguished

Both an assignment and a sublease are transfers by the tenant of estates in the demised land, i.e., transfers of possession for a period of time.

The essence of an assignment is that the tenant transfers the entire balance of its leasehold estate. A transfer purporting to be a "sublease" constitutes an assignment if it passes the balance of the term. E.g., Sheridan v. O.E. Doherty, Inc., 106 Wash. 561, 181 P. 16 (1919). If the tenant transfers the balance of the term but reserves a power of forfeiture, i.e., a right of entry, and if the transferee fails to pay rent or otherwise breaches, there is nonetheless no retention of a reversion, and the full term is assigned. Sheridan v. O.E. Doherty Inc., 106 Wash. 561 (alternative holding). But see Port of Pasco v. Stadelman Fruit, Inc., 60 Wn.App. 32, 802...