An assignment provision is undoubtedly one of the most important
clauses in a commercial lease agreement. These agreements can last
anywhere from three to five years — or even ten or more, with
renewal options — and they are signed with no idea as to the
future success, failure, or ownership of the tenant. If that
tenant's ownership changes, will their lease remain the
same?
Those considering whether to acquire or merge with a business
with an existing lease agreement must consider existing assignment
provisions as a factor. The sale of a tenant's business could
trigger various options, which are typically at the landlord's
election. The most extreme option would be the option to terminate
the lease upon notice of the sale. Therefore, it is vital to
carefully scrutinize and negotiate assignment provisions when
entering into a commercial lease agreement.
