Friday, January 26, 2007

something more familiar

Assignments and Subleases

This will make so much more sense than the rule against perpetuities, I promise. Furthermore, this is actually useful to know.

The leasehold is an interest in property that we're all probably familiar with. You need a place to live, you find an apartment, you sign a lease, you live there. Sometimes, however, you need to leave before your lease is up, either permanently or temporarily.

If you need to leave permanently, one of your options is to assign your lease to someone else entirely. Let's say you've just been offered a job teaching English in Bulgaria, for example. You really want to go, but you've still got four months left on your year-long lease. You put an ad on Craigslist and find someone willing to take over your lease so you can leave without breaching. Good for you.

But wait, is it really that simple? Could there be trouble lurking? Of course! The assignee (that yahoo you found on Craigslist) is now in "privity of estate" with the landlord, which is a fancy way of saying that he's responsible for paying rent and the other covenants that run with the land. However, *you* my friend are not off the hook. You're still in privity of contract with the landlord, which is a fancy way of saying he can still sue you and you're still ultimately liable for payment of rent on the lease even though you're out of possession.

Scary, huh? You're lounging around in Bulgaria, teaching English and taking in the sights, when you get a call from your old landlord saying, "Hey, that deadbeat you found on Craigslist just sits around smoking weed all day and he hasn't paid a penny in two months! Pay up or I'll sue you." And you, my friend, are screwed. Sure, you can sue the deadbeat from Craigslist after you pay the landlord, but you might not be able to get anything out of him. He sounds like a total loser anyway and is probably what they call judgment proof, ie: he ain't got no money.

Ok, so that's what happens when you need to leave permanently. What about when you need to leave temporarily? What if, for example, you're invited to teach a summer Shakespeare workshop to children at a camp in southern Oregon? You're near the beginning of a year-long lease and you only need to be gone for three months. You can't afford to pay rent while you're not in town, so you decide to sublease. You hop on Craigslist and you find someone who needs a place to crash this summer. Good for you.

But this can't be any better than the first situation, can it? Nope. It can't. This time, the sublessee has even less actual responsibility than the assignee. The sublessee isn't even in privity of estate with the landlord. As far as the landlord is concerned, the sublessee doesn't even exist. The sublessee owes his duty to pay rent to you, the original tenant. It's up to you to pay the landlord. And if he doesn't pay you...? Well, once again, you're screwed. This time the landlord doesn't even have the option of trying to squeeze it out of him first. You're the only one the landlord can turn to for payment. It's all on you. Again, you can try and sue the sublessee, but again, that might not help.

One scary option the landlord has is to get a lien against the personal property on the premises and assert that lien to cover the unpaid rent. That means, most likely, the landlord could come busting in one day with a sherrif's deputy who would seize whatever in the apartment looked like it might earn enough at auction to cover rent. If you left your stuff there for three months, which you probably did, it'll be your stuff getting seized. But if the sublessee brought in, for example, his $1500 mountain bike and his $800 jazz guitar (neither of which would actually bring in that much at an auction), then the sublessee might be the one who feels the pain. Or, maybe it'll just be a bong and some dirty t-shirts of his. Who knows.

Either way, assignment and subleasing are potentially dangerous for the original tenant and, if you find yourself in the position of needing to do it, you might want to keep all this liability in mind. Nothing ruins a trip to a Shakespearean summer camp like a deadbeat sublessee and a seizure of all your cool stuff. No sirree.


Anonymous sk said...

i had always wondered about that subleasing thing..... thanks RPP

hope your tummy feels better in the morning

there's a lurgy going around, that's for sure.


8:22 PM  

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