Basic concepts of law and equity grant tenants the right to assign or sublease their leasehold interests without the consent of their landlords. To limit this unfettered right, landlords frequently include lease provisions prohibiting such transfers without the landlord's prior written consent. In response, tenants often insist that the lease state that such consent may not be unreasonably withheld, delayed or conditioned.
However, contrary to the assumption of many landlords, even if the lease does not require specifically that the landlord be "reasonable" in granting or withholding consent, in most states landlords may not unreasonably deny consent to a proposed subtenant. Landlords who arbitrarily or capriciously deny consent to a proposed subtenant jeopardize the very validity of the lease they seek to enforce. Indeed, tenants have successfully terminated lease agreements based on the failure of the landlord to be reasonable when requested grant consent to a proposed subtenant.
A landlord cannot withhold consent based on its personal taste, convenience, conviction, religious beliefs, sensibility or desire to charge a higher rent. If a landlord denies consent for such reasons, the landlord may be deemed by some courts to have acted in bad faith, and the tenant might assign the lease without landlord's consent, or even terminate the lease.
To avoid these pitfalls, landlords are well advised to carefully consider each proposed subtenant before denying consent, and be reasonable, even if not required specifically by the terms of the lease. In so doing, some courts recommend that landlords consider the following objective characteristics of the proposed subtenant: (1) its financial responsibility; (2) its identity or business character to determine suitability for the premises; (3) its needs to alter the premises; (4) the legality of the proposed use; and (5) the nature of the of the occupancy (e.g. office, factory, clinic). By looking to these characteristics to make a rational business judgment about the proposed subtenant, the landlord will be in a better position to justify its ultimate decision.
If you are a landlord considering denying a proposed assignment or sublease, you should become familiar with the laws in your state and the common law, to ensure that your decision will not terminate the lease you intend to preserve.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.