Subleasing and assignment in commercial leases might sound similar, but they have very different legal and financial consequences. As a small business tenant, understanding the difference before you sign a lease can save you from serious problems down the line, especially if your business grows, downsizes, relocates, or shuts down.
Commercial leases often lock tenants into multi-year commitments. But in real life, business needs change. You might expand, move, merge, sell the business, or need to reduce overhead. Both subleasing and assignment offer exit strategies, but each comes with different rules, responsibilities, and risks.
What Is Subleasing?
A sublease allows you to rent out part or all of your leased space to another party, called a subtenant. You don’t give up the lease itself. You stay on as the primary tenant, and your name remains on the lease agreement with the landlord.
The subtenant pays you rent and follows the rules you set, while you continue to pay rent to the landlord and follow the terms of the master lease.
Subleasing can be temporary or long-term, and it’s a useful option when:
- You’re downsizing but want to keep the space
- You’re relocating part of your operations
- You plan to return after a short break
- You want to share costs with another business
Subleasing offers flexibility, but it carries risk. If the subtenant defaults, damages the property, or violates lease terms, you’re still responsible. The landlord will come after you—not the subtenant. That’s why due diligence and a strong sublease agreement are essential.
What Is Assignment?
An assignment is a full transfer of your lease. The new tenant (the assignee) takes your place and becomes responsible for the lease, including rent, repairs, insurance, and all other obligations. You step out of the agreement—but not always entirely.
In many commercial leases, even after assignment, the original tenant remains liable if the new tenant defaults. This is called continuing liability, and unless the landlord agrees in writing to release you, you could still be on the hook years later.
Assignment makes sense when:
- You’re selling your business
- You’re permanently relocating
- You want a clean break from the lease
But there’s a catch: many landlords require you to remain liable if the new tenant defaults. That means if they stop paying or breach the lease, the landlord can still come after you—even years later.
Key Differences
Here’s what separates subleasing from assignment:
- Responsibility: Subleasing means you remain the main tenant. Assignment shifts legal responsibility to someone else (though not always completely).
- Control: With a sublease, you still manage the relationship with the subtenant. In an assignment, the landlord and new tenant deal directly.
- Flexibility: Subleasing is often more temporary or partial, while assignment usually covers the full term and entire space.
- Landlord relationship: Subtenants don’t have a direct contract with the landlord. Assignees do.
What to Look for in Your Lease
Many commercial leases include strict limitations on both subleasing and assignment. Before signing a lease, carefully read any language related to tenant transfers. Look out for:
- Language requiring written consent from the landlord
- Clauses stating that consent can be withheld at the landlord’s discretion
- Recapture rights, which allow the landlord to terminate the lease if you request an assignment
- Requirements that you remain liable after assignment
If the lease includes any of these, it’s critical to negotiate better terms upfront. Once the lease is signed, you have little leverage.
- A well-negotiated lease might include:
- A reasonable consent clause (landlord can’t withhold approval without cause)
- A release of liability after assignment is approved
- Permission to sublease to certain types of businesses without approval
Why This Matters to Small Business Owners
As a tenant, your needs today might not match your needs two years from now. You might grow, downsize, or pivot. Having options in your lease can make or break your ability to adapt.
Being stuck in a rigid lease without flexibility to sublease or assign can lead to expensive problems—especially if you need to exit early or sell your business.
How Kleiner Law Can Help
Here at Kleiner Law we help small business tenants understand their lease and negotiate smarter terms before signing. We review subleasing and assignment clauses, negotiate clear language, and advise you when it’s time to sublease or assign your space.
We help you:
- Negotiate permission to assign or sublease
- Draft subleases and assignments that protect you
- Understand liability exposure
- Avoid legal pitfalls that cost time and money
Planning ahead gives you power. We’ll help you build flexibility into your lease so you’re never boxed in. Contact Kleiner Law today to schedule a lease review.
