We’ve discussed lease assignability recently in A Billboard Lease Is Not A License and Out of Home Attorneys on Assignability. Florida out of home attorney Jennifer Sloane reminds of the importance of assignability when it comes to other out of home agreements.
By Jennifer Sloane, Esq. Sloane Law Office.
The general rule is that the rights and duties of a party to a contract are freely assignable unless the right to assign is expressly prohibited by the contract. If then, a commercial lease is silent as to whether or not the Lessee can assign its lease, it may be assigned by the Lessee without the consent of the Lessor. This is a general rule. There will always be the anomaly which goes against the rule. And there will always be Lessors who try to read into other verbiage within a contract a meaning or intent not to permit assignment of the contract. Because that risk always exists, it is incredibly wise to make it your standard protocol to include assignability in all your documents.
If you find yourself in a position where a Lessor is challenging the assignability of a Lease, there are a few places in the Lease to look for guidance. The obvious “assignability” clause is the first place to look. If there is no assignability clause, you can also find language in the preamble or in other definitions within the Lease that define the Lessee as the named operator “and its successors, assigns, heirs, …”, etc. With this language, I always argue that the Lease grants the Lessee the right to assign the Lease. Courts interpret contract language in a way to give meaning to all words that are used in a document. The only way to give meaning to the use of the word “assigns” is to find that the parties intended for the Lessee to have the right to assign the Lease. When drafting a lease on behalf of a Lessee, if the Landlord is being difficult on the topic of assignment, I often leave out the assignability clause but retain the language that defines the “Lessee” as the named operator and its “assigns.” This accomplishes the same thing without being as obvious to the Lessor.
The other place where I see assignability language absent more often than I would like is within Advertising Contracts. OOH operators seem to focus on assignability in their land leases and not in their other contracts. Even if the law in a given state favors assignability and grants the right to assign when a commercial contract is silent on the issue, the reality is that if an advertiser wants to say they don’t consent to the assignment and there is no language in the advertising contract that grants to operator the right to assign the contract, the OOH operator is not likely to fight the issue in court (unless we are talking about a sizable Time Square ad contract of course). In the sale of all or substantially all of an operator’s assets to a third party, if one advertiser wants to back out of the contract based on the lack of assignment language, most operators won’t challenge the advertiser’s position (it is too costly) and thus, the Seller loses out on the value of the ad contract in the sale of the assets. Operators can avoid this problem all together by including the assignability language in all of their ad contracts.
The other area where assignability can be problematic is in Easements. While the law in the area of assignability of Easements is not settled, if there is language in the Easements that allows for assignability, the courts are likely to allow for the assignment of a commercial easement (key word being “likely” – it is not a guarantee). With this being the state of the law, as an operator, you do NOT want to spend over $100k on an Easement and NOT have clear and unequivocal assignment language in the Easement.
Whether it’s a lease, ad contract or easement, it is better to include assignability language in your agreements than to leave it silent and hope that the other party to the contract does not challenge assignability.
[wpforms id=”9787″]
Paid Advertisement
