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In regards to a commercial lease, my landlord is unreasonably withholding my right to sublease my unit to a qualified tenant.

Tustin, CA |

I signed a 4 year commercial lease to open a retail store about 2 years ago. The store is not performing up to my expectations so I would like to sublease my unit. The lease clearly reads "The landlord shall not unreasonable hold its consent in event tenant seeks to transfer it’s interest". A massage business, with 2 existing locations, is willing to take over my lease. However, when I went to get approval from the landlord, they denied it without supplying a proper response. They didn't ask to see financials, anything. All they said they think the unit would be best fitted for restaurant use. HOWEVER, previous to this, they told me they prefer that a retail store open, and not a restaurant (as there are so many in the plaza). They aren't taking me seriously - how can I elevate this?

Attorney Answers 4

Posted

You need to hire a tenants' lawyer to review your lease and send a demand letter to the landlord. They will not take you seriously without a lawyer.

This is not legal advice and does not create an attorney-client relationship. The information provided is a general statement of the law. Reviewing a case and giving legal advice to a client requires more information than can be exchanged in this format. If you need legal advice, contact an experienced tenants' attorney.

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Posted

Does your lease address both subleasing and assignment? A sublease is not necessarily a “transfer” of your “interest”, since you would still be the tenant under your lease and would still be liable to the Landlord for all of your obligations. A sublease would require you to enter into a separate sublease agreement with the massage business, under which you would be the Sublandlord and they would be the subtenant. An assignment is when the new tenant (massage business) actually takes over your lease and becomes the tenant directly responsible to the landlord for the obligations you agreed to under your lease. Regardless of whether it’s a sublease or an assignment, the Landlord may have denied your request for a number of reasons: change of permitted use, potential violation of existing tenants’ exclusive use, potential violation of existing tenants’ prohibited use or because the proposed use doesn’t fit in with the tenant mix in the shopping center. The most likely reason would be that existing tenants have a prohibition against massage – the antiquated notion of “massage parlors” – despite the prevalence of today’s massage studios that utilize licensed massage therapists.

One step to try prior to retaining an attorney to write a demand letter, is to send your own letter first. I’m not sure how you presented the idea to the Landlord the first time, but I recommend that you send an official notice to the Landlord, detailing your request for Landlord’s consent to your intended sublease/assignment. If your lease specifies the information Landlord requires as a condition to a transfer, then supply that information. Your lease likely requires all of this to be in writing and should spell out the proper means for delivery (usually via US mail, certified, return receipt requested).

If the Landlord denies your request, consider talking to the Landlord about an early termination for your lease. The Landlord may have another tenant in mind for the space or could at least begin looking for one.

I’m sorry that your business is not going as well as you had hoped and I wish you the best of luck in resolving this matter.

This response does not create an attorney-client relationship and is not intended to provide legal advice for your specific situation

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Posted

I agree with Mr. Driscoll. Hire an attorney experienced in commercial landlord tenant disputes to write a strongly worded demand letter. If that does not work, file suit for breach of contract.

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Posted

In California, there are a couple of basic principles governing subleases or assignments. The first is that a commercial lease may absolutely prohibit a sublease or an assignment. Civil Code Section 1995.230. The second is that a commercial lease may allow subleasing or assignment subject to the landlord's consent. If the lease contains express standards or conditions for the landlord's consent, then the landlord may generally refuse to consent until those conditions are met. If the lease does not contain express standards or conditions, then the landlord's consent may not be "unreasonably withheld." Civil Code Sections 1995.250 and 1995.260.

As with many leases, it sounds like your lease may not be worded particularly well, but it nevertheless appears to allow assignment or subleasing subject to the landlord's consent, which in this case may not be unreasonably withheld both as a matter of contract and as a matter of statute. Whether consent has been unreasonably withheld is a question of fact on which you, the tenant, have the burden of proof.

It's not clear from your description whether the exchange with your landlord was in writing. At a minimum, you should make a written request for to sublease, citing the provision of the lease you have quoted, and obtain a written response from your landlord as to why they will not consent. If you have already done that, then I think a phone call or a letter from a lawyer would be your next step, being careful to start in a friendly, business-like manner, because what you want is the landlord's consent, and not a lawsuit.

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