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  1. #1
    Join Date
    Jun 2011
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    Default Lease Assignment Fee

    My question involves landlord-tenant law in the State of: California

    I'm buying a Laundromat and find out the seller does not has lease agreement with the uppermost landlord/owner of the premises, but instead has the sublease with the first business owner, which is the original tenant/ current leaseholder. This current leaseholder has always overcharged the seller’s rent over its agreement with the landlord. Also even though the lease between the landlord and the current leasehold states " Tenant further agrees to reimburse for all reasonable expenses including but not limited to administrative, processing and attorney’s fees incurred by landlord with respect to any request for Landlord's consent to any assignment, subletting or other transfers. Such expenses in no event shall be more than $500", the current leaseholds, not the landlord, ask us to pay $5,000 assignment fees.

    Questions: 1. is this legal for the current leaseholder to charge more rent than its pay to the landlord?
    2. Is this reasonable or standard for the current lease holder to ask ten times assignment fees as the landlord asks?
    3. Could I contact and request to have lease with landlord directly?

    Thank you so much for your reply and time in advance.

  2. #2
    Join Date
    Sep 2005
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    98,846

    Default Re: Lease Assignment Fee

    Yes, it is perfectly legal for the original tenant to charge a subtenant a greater amount of rent, and to charge whatever the market will bear to somebody who wants an assignment of the lease. If the lease prohibits subletting, then the original tenant's landlord could attempt to terminate the lease based upon the subletting of the premises; but your question implies that the lease permits the subletting. You are free to negotiate with the original tenant to try to get the assignment of the lease such that you would be the tenant instead of a subtenant. If the sublease is improper, you can attempt to negotiate with the landlord to see if he will act against the original tenant and what terms he might offer to you.

    Whatever else happens, you would of course want to consider the costs of the tenancy when finalizing your purchase price.

  3. #3
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Lease Assignment Fee

    Let me add my dad is a commercial property LL, and normally when subleases are allowed, it also requires the written approval of the LL, at least in his leases. There's been a few cases when he had received such requests, he asked his tenant "how much rent he plans to charge", and if it is a bit over what he's charging, and at market, he had OK'd it.

    He also ran into a case where some several years later, the rent to the subtenant was raised considerably by his tenant, the sub-tenant paid, but the tenant in turn did not pay on a timely basis, was several months behind, and my dad proceeded to take action. What he did was he proceeded to revoke his approval, and then have the subtenant pay him the higher rent directly via a direct lease.

    As was pointed out to you, assignment fees and higher rents are not illegal as long as it does not violate the lease. I have bought and sold some businesses that I owned, I find I can either make the money on the leasehold, or make the money on the sale of the business assets itself, namely "goodwill", so I would just charge higher for the business if the buyer says he doesn't feel like paying for more rent.

    As to the amount of assignment fees, for laundromats and dry cleaners, the going rate where I am, i.e. NYC, is around $5,000.00. Often, it is the LL, not the guy selling the business, who winds up with it.

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