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When Can Landlords 'Unreasonably Withhold' Consent?

Cliff Ennico on

"I am a small landlord who owns several commercial buildings.

"One of my tenants -- who runs a small retail store -- is looking to sell his business and retire. There are several years left to go on his lease, and because he's such a good tenant, the rent is somewhat below market for this area.

"The buyer is a young man just out of military service. His credit history is good, and he comes from a decent family. The problem is that he has never worked in retail or ran a business of his own before. He also doesn't own a home. I like this young man personally, but I'm afraid he's going to get 'in over his head' and fall behind on his rent.

"The lease contains a clause requiring me to consent to any assignment or sublease of the rented space, as long as my consent is not 'unreasonably withheld.'

"I spoke to my attorney who told me I should ask this young man for several months' rent as an additional security deposit because it will take at least six months to evict him should he be unable to pay his rent. When I offered this to the young man, he became angry and told me he couldn't afford it. He said he felt I was discriminating against him because of his youth and his ethnic background, and that it was crazy to put that much money in an escrow account not earning interest for several years.

"I want to be helpful in this situation, but I can't afford to have tenants who don't pay their rent on time. I also cannot afford to be sued by the current tenant because I was unreasonable in withholding my approval of the lease transfer.

 

"Is there any way to get out of this jam?"

Once upon a time, landlords could evict their tenants the minute a rent payment became overdue. Not anymore.

Most commercial leases contain a clause requiring the landlord to approve any transfer of the lease to a new tenant, as long as the approval is "not unreasonably withheld." Most landlords will want to meet the new tenant and review his credit history before they will grant their approval to the transfer and release the old tenant from his liability under the lease.

If a new tenant is not financially able to make his lease payments on time or has background issues that would cause a reasonable person to question his integrity (for example, jail time or a bankruptcy), most landlords would "reasonably" refuse their consent to the transfer, and the law would back them up.

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