Go For The Curve 5.1 Assignment Of Lease

Assignments and Sub-Leases

Terms:


Assignment:
The transfer of an entire leasehold interest from a tenant to a third party.

Sub-letting:
The transfer of part of a leasehold interest from a tenant to a third party, in which the tenant keeps a remainder interest in the leasehold estate so that the property will go back to the tenant before eventually reverting to the landlord.

Privity of Estate:
A relationship that exists between two people who have a successive interest in the same property.

Privity of Contract:
The relationship between two parties to a contract that allows each party to enforce the terms of the contract against each other.


Assignments and subleases are terms for situations in which a tenant in possession of property transfers his or her right to possess that property to a third party. If the lessee transfers his or her entire remaining interest in the tenancy, then the transfer is known as an assignment. If the lessee transfers only part of his or her interest, then the transfer is known as a sublease. For example:

  1. Barney leases Rubbleacre from Fred for two years, beginning January 1, 2013 and ending on December 31, 2014 at the rental price of $1,000 per month. On January 1, 2014, with one year remaining on the lease, Barney and Kazoo agree that Kazoo will occupy the land for the remainder of the lease, and that Kazoo will pay the $1,000 per month rent to Fred. In this case, Barney has “assigned” his lease to Kazoo.
  2. Barney leases Rubbleacre from Fred for two years, beginning January 1, 2013 and ending on December 31, 2014 at the rental price of $1,000 per month. On January 1, 2014, with one year remaining on the lease, Barney and Kazoo agree that Kazoo will occupy the land for the next six months and pay the rent for those months. At the end of six months, Barney will move back onto the land and finish out the remainder of the lease. In this case because Barney and Kazoo have agreed that Kazoo will assume less than the full remainder of the lease, Barney has “sublet” part of his interest in Rubbleacre to Kazoo.

See McClain Airlines, Inc. v. Republic Airlines, Inc., 1991 U.S. App. LEXIS 18047 (1991).

As a general principle, both assignments and subleases are allowed, and so any tenant can assign his or her lease to a third party or sublease his or her interest in the property to a third party at any time. However, as a practical matter, many lease agreements specifically prohibit assignments or subleases. Of course, any agreement between landlord and tenant that prohibits assignments or subleases is fully binding and enforceable.

The key issue to be discussed, then, is what affect the transfer of interest has on all the involved parties. Since there are several parties involved in these transactions, we will start by defining the parties. In an assignment, there is the landlord/ lessor (the property owner), the tenant/ assignor (the person who leased it from the landlord and then assigned his or her interest to a third party) and the assignee (the person who received the assignment). In a sublease, there is the landlord/ lessor, the tenant/ sublessor (the party who leased the property from the landlord but is now subleasing the property to a third party), and the sublessee.

As a further necessary introduction, there are two forms of relationship between every landlord and tenant. There is a contractual relationship that took effect and exists by virtue of the lease agreement itself. That relationship is known as “privity of contract”. In addition, there is a property ownership relationship, by virtue of their sharing of the ownership of the property. That relationship is known as “privity of estate”. “Privity of estate” exists between two parties when those two parties have successive ownerships in the same property (i.e., one holds a present interest while the other holds a future interest or they both hold future interests, one after another).

The Assignment

An assignment is a full transfer of the lease between the tenant and the assignee. Therefore, since the tenant no longer has any ownership interest in the property, there is no longer any relationship between the landlord and the tenant as far as the property ownership is concerned. Therefore, there is no longer “privity of estate” between the landlord and the tenant. On the other hand, there now is privity of estate between the landlord and the assignee. This is because the assignee now owns the present interest in the property. This present interest will end only at the end of the lease when it will go back to the landlord. Since the landlord’s right to possession is now successive to the possession of the assignee, the landlord and assignee are in privity of estate.

Privity of contract, on the other hand, still exists between the landlord and the tenant. This is because the original contract that existed between the landlord and the tenant is still fully valid even after the assignment. In other words, the landlord does not give up his or her right to enforce the lease agreement with the tenant just because the tenant transfers his or her interest to the third party. There is no privity of contract, of course, between the landlord and the assignee because those two parties never agreed to anything between themselves. For example:

Ethel owns Blackacre. She leases Blackacre to Lucy for 5 years. During year 2, Lucy assigns her interest in Blackacre to Ricky. Ethel is in privity of estate with Ricky and not Lucy and in privity of contract with Lucy and not Ricky. Also note that Lucy and Ricky are in privity of contract (because they made an agreement with each other), but not in privity of estate (Lucy has no possession interest in Blackacre, and so she does not have an interest that either follows or is followed by Ricky’s interest).

The Sublease

The sublease is only a partial transfer of interest from the tenant to the sublessee. The tenant is transferring part of his or her interest in time to the sublessee. Therefore, there is no privity of contract or privity of estate between the landlord and the sublessee in a sublease. The reason that there is no privity of estate between the landlord and the sublessee is that the landlord’s right to possession of the property does not follow the sublessee’s right to possession. Instead, it still follows the tenant’s right of possession. The landlord is, however, still in both privity of estate and privity of contract with the tenant. Privity of contract is still applicable for the same reason as with the assignment (the landlord and the tenant agreed on the terms of the original lease). In addition, there is privity of estate between the landlord and the tenant because the right to possession of the landlord still follows the right of possession of the tenant. For example:

Ethel owns Blackacre. She leases Blackacre to Lucy for 5 years. During year 2, Lucy subleases Blackacre to Ricky for one year. Ethel is not in privity of estate or privity of contract with Ricky because she did not make an agreement with Ricky and because her interest in possession of Blackacre does not follow Ricky’s (it follows the end of Lucy’s five year lease). On the other hand, Ethel and Lucy are in both privity of contract (because their agreement is still valid) and privity of estate (because Ethel’s interest follows the end of Lucy’s lease). Note that Lucy and Ricky are in both privity of estate and privity of contract. They are in privity of contract because they made an agreement with each other. They are in privity of estate because Lucy’s interest (in the remainder of her lease) follows Ricky’s interest (Lucy will get Blackacre at the end of Ricky’s one year sublease).

The ramifications of who is in privity of what with whom can be crystalized in a few rules:

  1. A party collecting rent (landlord from the tenant or tenant from assignee or sublessee) can collect rent from someone with whom he or she is in privity of contract or privity of estate.
  2. A party looking to enforce obligations of the landlord can only enforce those obligations against a party with whom he or she is in privity of estate.
  3. The contractual terms of the lease itself can only be enforced against a party with whom the party seeking to enforce the terms is in privity of contract.

For example:

1. Ethel owns Blackacre. She leases Blackacre to Lucy for 5 years. During year 2, Lucy assigns her interest in Blackacre to Ricky.

  • Ethel may collect rent from Ricky or Lucy.
  • Lucy may not collect rent from Ricky.
  • Ricky may enforce landlords’ obligations against Ethel, but not against Lucy. Lucy may not enforce landlords’ obligations against Ethel.

2. Ethel owns Blackacre. She leases Blackacre to Lucy for 5 years. During year 2, Lucy subleases Blackacre to Ricky for one year.

  • Ethel may collect rent from Lucy, only, not Ricky.
  • Lucy may collect rent from Ricky.
  • Ricky may enforce landlords’ obligations against Lucy, but not against Ethel.
  • Lucy may enforce landlords’ obligations against Ethel.

Residential Tenancies Tribunal

I am a Landlord - Lease Information:

Form 6 Residential Lease (Standard Form of Lease)

Entering Into a Lease:

Quick Tips from the Residential Tenancies Tribunal on being a good Landlord:

    • Select wisely: Choosing the right tenants is one of the most important decisions you’ll make.
    • Call references: See what others think of your potential tenant.
    • Trust your instincts: If you have less confidence in a potential tenant than you’d like, don’t rent to them.
    • Be fair: Use the same screening process for all your prospective tenants.
    • Get a deposit: Protect yourself by requiring a security deposit.
    • Put it in writing: Use the Standard Form of Lease, and get it signed.
    • Check it out: Be sure that you and your tenant complete and sign an inspection report.
    • Fix it: As soon as know there is an issue, get it repaired right away.
    • Stop by: Inspecting the premises every few months will help you spot problems early on. Be sure to give proper notice.
Ending a Lease

Notice of Termination

How can I end my lease?
Leases can end in several ways:

    1. A fixed term lease automatically ends at the end of the agreed period of time.
    2. Week-to-week, month-to-month and year-to-year leases can be ended by either the landlord or the tenant by giving proper written notice.

Type of Lease

What is proper written notice?

Week-to-week

No later than the day rent is due one week before the landlord would like to end the lease.
For example: The lease began on Monday, March 2nd. The landlord wants to end the lease on Sunday, July 5th. The landlord must give notice no later than Monday, June 29th.

Month-to-month

No later than the day rent is due one month before the landlord would like to end the lease.
For example: The lease begins on February 1st. The landlord wants to end the lease on August 31st. The landlord must give notice no later than August 1st.

Year-to-year

No later than the day rent is due three months before the anniversary of the lease only.
For example: The lease begins on January 1, 2017. The earliest the landlord could end the lease is December 31, 2017. If the landlord decides to end the lease on December 31, 2017, he/she must give notice no later than October 1, 2017.

There are special rules for long term tenancies and mobile home site tenancies.

Does the landlord or tenant need to give a reason for ending the lease?
No, but there are special rules for long term tenancies and mobile home site tenancies.

Can a lease be ended in the wintertime?
Yes.

What time of day does the lease end?
Leases end at midnight. For example, if the lease ends on May 31st, the tenant must move out by midnight on May 31st.

Lease Information:

What is a Lease?
A lease is a written agreement between the landlord and the tenant. In New Brunswick, both the landlord and the tenant must sign two copies of the Residential Lease. The landlord and tenant should each keep one of the signed originals. The Residential Tenancies Tribunal does not require a copy of your lease once you have signed it.

The New Brunswick lease covers tenancy agreements for apartments, houses, condos, rooms and mobile homes sites. The lease contains crucial information about the tenancy, and becomes an essential communication tool between the tenant and the landlord.

What if my Tenant and I don’t sign a Residential Lease?
While the law doesn’t require you to sign the Residential Lease, the Residential Tenancies Tribunal strongly recommends it. Whether or not you sign the Residential Lease, the Residential Tenancies Act still applies to you and your landlord.

Can my Tenant and I agree to additional rules and obligations?
Yes. The additional rules and obligations must be included on the Residential Lease before it is signed by both you and the landlord. Additional rules and obligations can’t change any rights or duties as described in the lease or the Residential Tenancies Act of New Brunswick.

What happens if I sell my building during an ongoing tenancy?
The same lease will apply to the new landlord. Your former landlord has to complete and give a signed Form 8 Notice of Transfer to you and a copy to the Residential Tenancies Tribunal within seven days of transferring ownership of the building.

Can a landlord or tenant change his/her mind about renting
No. Once the tenant and landlord have come to a written agreement about the tenancy and/or money has exchanged hands, a tenancy has commenced.

Can a person under the age of 19 sign a lease?
Yes.

Can I change the rules or obligations of my tenant’s lease such as increasing the rent?
A landlord can increase the rent, but only in accordance with the Residential Tenancies Act. Nothing else can be changed except in specific circumstances for long-term tenancies and specific circumstances for mobile home sites.

Long-Term Tenancy (5+ years as a tenant):

What is a long-term tenancy?
A long-term tenancy is one where the same tenant has lived in the same premise for at least five consecutive years.

• How does a long-term lease end?
A long-term tenant can end a lease at any time by giving the landlord one month’s written notice.

The landlord can end the lease by giving the long-term tenant three months' written notice. He/she must also give the reason in the notice. The only acceptable reasons are:

    • if the landlord or his/her immediate family want to live in the rental
    • if the rental will be used for something other than residential premises
    • if the rental will be renovated significantly
    • if the tenant is working for the landlord maintaining or managing the rental, and the job ends.

Remember, your tenant can dispute your Notice of Termination if they apply within 15 days to the Residential Tenancies Tribunal for a review.

Can I, as a landlord, change any of the rules or obligations of a long term tenancy?
Yes. The landlord must give the tenant three months’ written notice. The change must be fair and reasonable, and not interfere with any right or duty as explained in the Residential Tenancies Act. The tenant may dispute the Notice of Alteration by applying in writing within 15 days of receipt of the Notice to the Residential Tenancies Tribunal.

Can I increase the rent of a long term tenancy?
Yes. You must give the tenant three months' written notice. You may only increase the rent fairly and by the same amount as other similar units in the same building. Or the rent must be increased only by what is reasonable in other similar units in the same area.

Can my long-term tenant move if they don’t want to pay more rent?
Your long-term tenant can move if they don’t want to pay more rent but they must give you one month’s written notice (from the day the rent is due) to end the lease. They can also dispute a rent increase by applying to the Residential Tenancies Tribunal for a review within 15 days of receipt of the Notice.

Mobile Home Site Tenancy:

What is a mobile home site tenancy?
A mobile home site tenancy is one where a tenant rents a site within a mobile home park.

How does a mobile home site lease end?
A mobile home site tenant can end a lease at any time by giving the landlord two months' written notice.

The landlord can end the lease by giving the tenant six months' written notice. He/she must also give the reason in the notice. The only acceptable reasons are:

    • if the landlord or his/her immediate family want to live on the rental premise
    • if the site will be used for something other than as a mobile home site
    • if the site will be renovated significantly.

Remember, your tenant can dispute your Notice of Termination if they apply within 15 days to the Residential Tenancies Tribunal for a review.

Can I change any rules or obligations of my mobile home lease?
Yes. The landlord must give the tenant three months' written notice. The tenant may dispute the Notice of Alteration by applying in writing within 15 days to the Residential Tenancies Tribunal.

Can I increase the rent on my tenant’s mobile home site lease?
Yes. To increase the rent, you must give you at least six months' written notice. You must increase the rent for each mobile home site in the mobile home park or in the same area of the park by the same percentage.

Can my tenant move if they don’t want to pay more rent?
Yes. A Notice of Rent Increase can be treated as a Notice of Termination, but to end the lease, the tenant must give the landlord one month's written notice within the six month rental increase notice period. They can also dispute your increase in rent by applying to the Residential Tenancies Tribunal for a review within 15 days of Receipt of the Notice.

My tenant wants to assign their lease – do I have to let them?
In the case of Mobile home sites: The landlord must allow the tenant to sublet or assign the lease, but the lease may allow the landlord to give his/her agreement.

Assignment and Subletting:

What is assignment?
Assignment is when the tenant gives the lease to someone else who becomes the new tenant. In the lease, there are three options for assignment. One will be agreed on before signing the lease:

    1. The tenant may assign all of the tenant's rights under this lease for the remaining term of the lease or for a portion of the remaining term of the lease.
    2. The tenant may only assign all of the tenant's rights under this lease for the remaining term of the lease or for a portion of the remaining term of the lease with the consent of the landlord.
    3. The tenant may not assign any of the tenant's rights under this lease. (Not a valid option for mobile home site.)

What is subletting?
Subletting is when a tenant rents his/her rental to somebody else for part of the tenancy period.

What is the tenant responsible for when subletting?
The tenant is responsible for:

    • Any damages and cleaning requirements caused by the subletter
    • Any rent owed by the subletter

The landlord may be able to use the tenant's security deposit to pay for any damages, cleaning or rent owed by the subletter. The landlord must send the tenant a copy of any notice given to the subletter.

Do I have to let the tenant sublet or assign the lease?
It depends what you both agreed to when you signed the Residential Lease. If the lease says that the landlord must give his/her okay to assign the lease, then the tenant should give the landlord Form 7 Request for Consent to Assign. The landlord has seven days to respond, and cannot refuse without a good reason.

In the case of Mobile home sites: The landlord must allow the tenant to sublet or assign the lease, but the lease may allow the landlord to give his/her agreement.

Does the tenant have to pay the landlord a fee to assign?
The landlord may charge up to $20 to cover expenses where the lease requires the landlord's agreement to assign.

Rent Increases:

Can I, as a landlord, increase the rent anytime?
Yes, but you must give the tenant proper written notice.

Type of Tenancy

How much notice?

Week-to-week

Two Months

Month-to-month

Two Months

Year-to-year

Three Months

Fixed term

Three months only if the box in Section 4(5)(a) of the Residential Lease has been selected or if the rent increase is not referenced in Section 4(6) of the Residential Lease.

There are special rules for increasing the rent for long term tenancies and mobile home site tenancies.

Can my tenant move if they don’t want to pay more rent?
Yes. A Notice of Rent Increase can be treated as a Notice of Termination, but the tenant must give the landlord proper written notice to end the lease.

Type of Tenancy

How much notice?

Week-to-week

One week

Month-to-month

One month

Year-to-year

At least one month before the day before the rent is due to increase.*

Fixed term

At least one month before the day before the rent is due to increase.*

*A long-term tenant or tenant of a mobile home site who receives a Notice of rent increase from the landlord, may apply to the Residential Tenancies Tribunal within 15 days of receiving the notice to have it reviewed by a Residential Tenancies Officer.

There are special rules for long term tenancies and mobile home site tenancies.

Entry by Landlord:

Can I go into the premises?
Yes, but you must give the appropriate notice before entering. Entry must not be on a Sunday or holiday. It must be between 8am and 8pm

The landlord or his or her agent can enter the premises:

    • Without notice,
      • when the tenant agrees at the time.
      • when the tenant has abandoned the premises or for an emergency.
      • for a two-day period after receipt of a tenant's written request to carry out repairs.
      • for rooms where housekeeping services are provided by the landlord.
    • With at least a 24 hours notice,
      • to carry out the tenant's request for repairs after the two days' delay has past.
      • to inspect the premises or to show them to prospective purchasers or mortgagees
    • With at least a seven days notice, for normal repairs or redecoration.

Can I go into the rented premises to show it to a prospective tenant?
Yes, you can go into the rented premises to show it to a prospective tenant without giving notice, but only during the last rental period and if indicated in Section 2, E – Additions of the Residential Lease.

If this rule wasn't added to the lease, but the tenant agrees at the time, the landlord may enter without giving notice. However, the tenant may ask that the landlord give a 24-hour notice before entering. Then, this entry must not be on a Sunday or holiday and must be made between 8am and 8pm.

Roomers and Boarders:

Rooming and boarding houses fall under the jurisdiction of the Residential Tenancies Act and both tenants and landlords must follow the same rules as for any other rental premise.

What is a rooming house?
A rooming house is a premise where tenants have their own room, but share common facilities such as a kitchen and bathrooms. A rooming house may also provide additional services. Certain rooming and boarding house accommodations are excluded from the Residential Tenancies Act. These include accommodations:

    • where the tenant is required to share a bathroom or kitchen facility or both with the landlord and where the landlord lives in the building in which the living accommodations are located
    • provided by an education institution to its students without self-contained bathroom and kitchen facilities
    • occupied for business or agricultural purposes
    • occupied as part of a non-residential building where the tenant is employed
    • occupied as a vacation home for a seasonal or temporary period
    • emergency shelter or a youth hostel
    • and some other instances such as religious, healthcare and correctional facilities.

What is a boarding house?
It is the same as a rooming house with the exception that some or all meals are provided by the landlord under the tenancy agreement.

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