Negotiating the “No Consent” Assignment and Sublet Clause – When
is a Consent Not a Consent?
March 21, 2012
Moderator: Meghan Hayden of Levett Rockwood
Panelist: Richard Frome of New York City
Panelist: Michelle Greenberg of Moritt Hock & Hamroff.
SAMPLE RETAIL CLAUSES
LANDLORD CLAUSE #1 (A tight clause for tenant to agree to,
especially the subparagraph (b) financial statement standards,
but otherwise could be survived).
a. Upon any assignment of this Lease or sublease of all or
any portion of the Premises, any and all option rights, rights of
first refusal, rights of first negotiation, and expansion rights
shall terminate, it being understood that any and all such
rights are personal to Tenant named herein (and not to any
assignee or subtenant) and are not appurtenant to the Premises
or this Lease. Further, Tenant shall not have the right to
exercise any such rights unless Tenant (and not any assignee or
subtenant of Tenant) shall be in occupancy of all of the Premises
at the time of the exercise of any such right. In addition to the
administrative fee described in Section 134a., above, Tenant
shall reimburse Landlord upon demand, as additional rent, an
amount equal to any and all third-party legal and/or accounting
fees and expenses or other costs and expenses incurred by
Landlord in connection with any assignment of this Lease or
subletting of all or any portion of the Premises, whether or not
Landlord consents to such assignment or subletting. Tenant shall
not collaterally assign, mortgage, pledge, hypothecate or
otherwise encumber this Lease or any of Tenant's rights
hereunder without the prior written consent of Landlord, which
consent Landlord may withhold in its sole discretion.
b.
(i)
Notwithstanding
the
above
restrictions
on
subletting and assignments, Landlord’s prior consent shall
not be required for any assignment or subletting to an Affiliate
of Tenant (as defined below) or a Parent of Tenant (as defined
below), provided (1) that such assignee has a creditworthiness
(e.g. assets and capitalization) and net worth (which shall be
determined using audited financial statements prepared using
generally accepted accounting principles consistently applied by
an independent firm of certified public accountants having at
least 50 partners) not less than that of Tenant as of the
Effective Date or if more then as of the date of the notice of
assignment or subletting and otherwise reasonably acceptable to
Landlord, taking into account Tenant’s obligations under this
Lease, (2) that such assignee or subtenant agrees in writing to
be bound by the terms and conditions of this Lease and to
assume all of the obligations and liabilities of Tenant under
this Lease, (3) that Tenant provides Landlord with prior written
notice of its intent to assign or sublease all or a portion of
the Premises not more than sixty (60) nor less than fifteen (15)
days prior to the effective date of such assignment or
sublease, and (4) that the proposed assignment or sublease with
such person or entity is not a so-called “sham” transaction
intended by Tenant to circumvent the provisions of this
Section. Tenant shall be entitled to retain, in full, any
profit it obtains as a result of an assignment or subletting
pursuant to this Section.
(ii)
In the event of any assignment or subletting
pursuant to this Section, Tenant shall remain fully liable as a
primary obligor and principal for Tenant’s obligations and
responsibilities under this Lease, including, but not limited to,
the payment of all rent and charges required hereunder and the
performance of all conditions and obligations to be performed
under this Lease.
(iii)
For purposes of this Section, an “Affiliate of
Tenant” shall mean any corporation, limited liability company,
association, trust, or partnership (1) that Controls (as herein
defined) Tenant, (2) that is under the Control of Tenant, through
stock ownership or otherwise, (3) that is under common Control
with Tenant, or (4) which results from the merger or consolidation
with Tenant, or acquires all or substantially all of the assets
of and interest in Tenant, provided that such Affiliate of
Tenant is simultaneously assigned the leases of at least two
(2) other stores operating under Tenant's Trade Name. For the
purposes
hereof,
a
“Parent
of
Tenant”
shall
mean
any
corporation, limited liability company, association, trust, or
partnership (A) that Controls Tenant, or (B) that owns more than
fifty percent (50%) of the issued and outstanding voting
securities of Tenant. The terms “Control” or “Controls” as used
in this Section 7.i shall mean the power to directly or indirectly
influence the direction, management, or policies of Tenant or
such other entity.
c.
Notwithstanding
any
consent
by
Landlord
to
an
assignment or subletting, Tenant shall remain primarily liable
for the performance of all covenants and obligations contained
in this Lease. Each assignee approved by Landlord shall also
automatically become liable for all of the obligations of Tenant
under this Lease. Each subtenant approved by Landlord shall
automatically become liable for the obligations of Tenant under
this Lease relating to the sublet space (other than the payment
of Rent or the posting of the Security Deposit). Landlord shall
be permitted to enforce the provisions of this Lease directly
against Tenant and/or against any assignee or sublessee without
proceeding in any way against any other person. Collection or
acceptance of Base Rent or Additional Rent from any such
assignee, subtenant or occupant shall not constitute a waiver or
release of Tenant from the terms of any covenant or obligation
contained in this Lease, nor shall such collection or acceptance
in any way be construed to relieve Tenant from obtaining the
prior written consent of Landlord to such assignment or
subletting or any subsequent assignment or subletting.
-----------------------SAMPLE CLAUSE #2 – A NO CONSENT CLAUSE THAT’S ILLUSORY [Where
you might expect no consent but are not getting it!]
(a)
Landlord’s consent shall not be unreasonably
withheld to an assignment of this Lease or a sublease for all of
the Leased Premises (by merger, consolidation or otherwise) to
another entity (the “Transferee”) to which Tenant shall
simultaneously transfer all or substantially all of its stock,
membership interests, partnership interests or other ownership
interests or all or substantially all of its assets, provided
that:
(i) Tenant shall not at the time of such assignment or
sublease be in default under any of the terms, covenants and
conditions of this Lease; (ii) such Transferee shall agree in
writing (in form and substance satisfactory to Landlord and its
lender(s)) to perform all of the unperformed terms, covenants
and conditions of this Lease; (iii) both the assignor Tenant and
the Transferee Tenant shall at all times remain jointly and
severally liable and primarily obligated for the performance of
the terms, covenants and conditions of this Lease; and (iv) the
number of stores and/or units being transferred by assignment or
sublease must consist of at least seventy-five percent (75%) of
Tenant’s stores located in the ___________ Area.
---------------------------------
After you give Landlord the preemptive right to cancel, then if
they decline the following ensues, fairly standard except the
amount of net worth valuation and the profit sharing:
SAMPLE CLAUSE 3
In the event that Tenant shall desire to sublet the Demised
Premises or to assign this Lease and Landlord does not exercise
the right of recapture as set forth in the preceding paragraph
____,then Tenant may, without Landlord's consent, assign this
Lease or sublet all of the Demised Premises within six (6)
months
after
Landlord
fails
to
recapture
pursuant
to
subparagraph (a), provided the following terms and conditions
are fully complied with:
A. Tenant shall not be in Default under this Lease at
the time Landlord's consent is requested or at the
effective date of the assignment or subletting.
B. The proposed assignee or subtenant shall have a
tangible net worth at the time of the assignment or
subletting of at least TWENTY-FIVE MILLION and
00/100 ($25,000,000.00) DOLLARS and the proposed
assignee or subtenant shall be of a character in
keeping with the standards of the other tenants of
the Shopping Center. Tenant shall furnish Landlord
with such financial data and other information as
Landlord may reasonably request.
C. The
Demised
Premises
shall
be
used
for
the
Authorized Use, provided, however that the principal
use thereof (if other than the then Permitted Use
hereunder) (i) shall not be the same as or
substantially similar to the principal business or
use of any other then existing tenant or occupant in
the Shopping Center, and (ii) shall not conflict
with any "exclusive" which inures to the benefit of
any tenant or occupant of the Shopping Center, or
any then existing restrictive covenants regarding
the use of the Shopping Center, the Demised Premises
or the Common Areas, and for no other purpose;
provided; however, upon request Landlord shall
advise Tenant of the then uses
affecting the Shopping Center.
and
restrictions
D. Tenant shall pay to Landlord a sum equal to (1)
fifty
(50%)
percent
of
any
rent
or
other
consideration paid to Tenant by any assignee or
subtenant which is in excess of the Rent then being
paid by Tenant to Landlord pursuant to the terms of
this Lease and fifty (50%) percent of any percentage
rent paid to Tenant by such assignee or sublessee,
and (2) fifty (50%) percent of any other profit or
gain
realized
by
Tenant,
as
additional
rent
immediately upon receipt thereof by Tenant; provided
that Tenant may first deduct the Transaction
Expenses (as hereinafter defined).
For purposes
hereof the term “Transaction Expenses” shall mean:
(i) the reasonable out-of-pocket legal costs and
expense of Tenant in making such sublease or
assignment, (ii) a single reasonable brokerage
commission; and (iii) any free rent which Tenant
reasonably provides such successor (but in no event
more than six month’s rent).
E. In the case of an assignment (other than a Deemed
Transfer [i.e. equity [[stock etc.]] only]), it
shall provide for the assignment of Tenant's entire
interest of this Lease and the acceptance by the
assignee of said assignment and its assumption and
agreement to perform directly for the benefit of
Landlord all of the terms and provisions of this
Lease on Tenant's part to be performed.
F. In the case of a subletting, it shall be expressly
subject to all of the obligations of Tenant under
this Lease and the further condition and restriction
that the sublease shall not be assigned, encumbered
or otherwise transferred or the subleased premises
further sublet by the sublessee in whole or in part,
or any part thereof suffered or permitted by the
sublessee to be used or occupied by others, without
the prior written consent of Landlord in each
instance.
G. There shall not be more than one (1) sublease in
effect covering the Demised Premises at any time
during the Term.
H. Tenant
shall
pay
the
reasonable
fee
and
disbursements of Landlord’s attorney in connection
with any assignment or subletting.
I. Landlord shall be furnished with a duplicate
original of the assignment or sublease within (i)
ten (10) days after its execution, or (ii) prior to
its effective date, whichever is earlier.