When you are selling or restructuring your business in Florida, your current lease can become a major liability. Your current deal may get delayed or even fall through if you are still locked into a contract.
Fortunately, it is possible to transfer your lease obligations to someone else. Knowing what your options are can help you maintain operational flexibility while staying compliant with local landlord-tenant laws.
Assignment vs. subletting
When considering how to go about your lease transfer, you have the option to assign or sublet your space. With assignment, you surrender your entire leasehold interest to another party. This new tenant takes over your rights and obligations, directly dealing with your landlord.
With subletting, you let another party use all or part of your space for a portion of the remaining lease term. You generally function like a landlord while remaining responsible under the original lease. Whether you choose assignment or subletting, it is vital to ensure your lease contract permits it.
Critical clauses to watch out for
State law is generally particular about contracts, and courts will often uphold the language used in your agreement. It can be helpful to read the fine print of your lease terms to check for these provisions:
- Recapture rights: Your landlord will terminate your lease and take the space back entirely if you ask for permission to sublet.
- Profit sharing: You may be required to split or forfeit any excess rent gained from a subtenant.
- Ongoing liability: You remain accountable if the new tenant fails to pay rent, unless there is a signed formal release.
Unless your lease agreement explicitly gives your landlord sole and absolute discretion to say no, they cannot deny your request to transfer the lease.
Protecting your business
When speaking with your landlord, you can negotiate a permitted transfer clause on the agreement to give your business greater flexibility. This provision gives you the right to assign the lease without the landlord’s consent in key transactions like a merger, sale of the business or transfer to an affiliate.
Having this clause helps ensure your lease moves with the business and will not disrupt a deal. You may also want to get this agreement in writing and formally documented to avoid sudden terminations of your tenancy by your landlord.
Making your lease work for your business
Negotiating favorable transfer provisions upfront allows you to maintain flexibility needed for the long-term survival of your company. A lawyer can help you review your commercial lease terms and protect your interests in any transaction.