Assignments and subleases are commonplace. The difference between the two is a product of common law. This article will outline the fundamental differences between assignments and subleases, how the common law arranges the ongoing rights among the parties, and the advisability of certain express agreements that change the common law results.
First Comes, First: Definitions
The nature of the transfer depends on the quantity of interest in the property is transferred.. This distinction can be conceptualized easier by looking at each definition:
When a tenant transfers its entire interest in a leasehold estate, the transfer is an assignment. To qualify as such, the transfer must include the tenant's entire estate for the duration of the lease. For example, say Sally is an actress who has a 6 month filming gig out in Cannes but 6 months left on her lease. If she decided to transfer of all of the rights she had in her NYC apartment to her friend Monique for the remaining 6 months of her lease that would be an assignment.
In contrast, when a tenant transfers less than the remaining term or less than the tenant's entire estate the transfer is a sublease. For example, if Sally’s gig was only 4 months long and only sublet her apartment to Monique for 4 months, than to back the apartment for the remaining 2 months, it would be a sublease.
Determination of whether a tenant has retained a portion of the estate does not depend on the whether the tenant receives less rent than it owes under the lease, or even on whether the tenant transferred the entire premises. An assignment can occur regardless. But, retention by the tenant of even the smallest right with respect to the term constitutes a "reversionary interest" and creates a sublease.
For instance, courts would likely construe a transfer as a sublease if Sally retained an option to terminate, extend or renew the prime lease. In fact, the reversionary interest need not even be under the control of the original tenant to qualify the transaction as a sublease.
Surprisingly, one factor that does not distinguish an assignment from a sublease is the portion of premises involved. As long as the tenant relinquishes its interest in the portion of the premises transferred for the entire term of the lease, an "assignment pro tanto" occurs. Such a transfer carries all the legal implications of any other assignment, except that the assignee has liability for only a portion of the rent proportionate to the interest it receives in the premises. In our example, an assignment pro tanto if Sally assigned the rights to one of the bedrooms in her apartment to Monique for the remainder of the lease.
Most people would think that a sublease has occurred, because less than the entire premises has been conveyed. However, such a transfer creates a form of assignment. This means that the assignee will have privity of estate with the landlord, and may have privity of contract as well.
Do I Need Consent?
Many leases prevent tenants from assigning or subleasing (or subletting) the lease, primarily because the landlord wants to ensure the payment of rent and know who his or her tenant is at all times. Some leases allow assignments and subleases only when the landlord consents, and some state laws prohibit them unless the landlord consents.
When consent is necessary, the laws in almost every state require the landlord to act reasonably, that is, he or she can't refuse consent just because he or she doesn't "like" the original tenant. Nor can the refusal be based on discriminatory reasons, such as the sub-lessee or assignee's gender or race. But, refusal can be based upon the new tenant's inability to pay the rent or bad credit history.
Effects of the Transfer
Generally, unless the subtenant or assignee agrees, either as part of the assignment or sublease agreement or in a separate agreement, to assume, or accept, the original tenant's obligations under the original lease, the landlord can't enforce any of the lease provisions against the assignee or subtenant.
But, an assumption agreement does not release the original tenant from his or her obligations under the master lease unless the original landlord expressly agrees to such a release.
So, for example, under any residential lease, the tenant has the obligation to pay rent. After a sublease or assignment is made, the tenant still has that obligation, even if there was an assumption agreement. So, unless the landlord releases the tenant, the landlord can look to the tenant for rent payments if the subtenant or assignee fails to pay the rent.
As a tenant, you'll want to get a release from the landlord and an assumption agreement from the subtenant or assignee. As the landlord, in order to best guarantee rent payments, you'll want to insist on an assumption by the assignee/subtenant, and you don't want to release the tenant.
Generally, an assignment of a lease results in the assignee stepping into the shoes of the original tenant. The original tenant loses his or her right to live on the premises, and the assignee and the landlord are bound by the lease covenants or promises that run with land, that is, covenants that benefit the land, such as the covenants to pay rent and to make repairs.
Usually, the assignee can't avoid its responsibilities, especially liability for rent, by assigning the lease to someone else, and the original tenant is liable on the lease, including payment of rent, unless he or she was released from those obligations by the landlord.
In a sublease, unless the subtenant assumes the obligations of the master lease, there's no legal relationship between the subtenant and the landlord, and so the subtenant doesn't have to pay the landlord rent and the landlord doesn't have to respond to the subtenant's request or demand for repairs.
Rather, the landlord-tenant relationship is actually between the original tenant and the subtenant. Typically, you, as the original tenant, remain liable for rent: the subtenant will pay you rent, and you're responsible for paying the landlord on time. Also, you're obligated to perform all other covenants under the lease, such as making sure the property is not damaged.
The sublease should spell-out how various problems reported by the subtenant will be handled. For example, if the subtenant finds a problem with the premises, such as a leaky roof, he or she can't force the landlord to fix it, unless the subtenant assumed the lease. What will typically happen here is the subtenant would notify you, and you would have to fix the problem or enforce the landlord's obligation to fix it.
As practical matters, sublandlords and subtenants should protect themselves as any primary landlord and tenant would, such as having a detailed written lease that spells-out each party's rights and responsibilities and requires the payment of a security deposit.
By Elspeth Crawford
Recently, pop star Britney Spears began her new gig as a judge on Fox’s “The X Factor,” where she helped coach potential pop stars to singing super-stardom. However, much of the press covering her debut surrounded a quirky rider to her employment contract, which reportedly demanded that her dressing room be stocked with 10 bags of Doritos, 12 Snickers bars, 10 pieces of fried chicken, and 34 designer dresses. It seems extreme, but this is far from the first time a celebrity or other public figure has made an odd request in their contract. Here’s a collection of some of the more interesting ones.
As silly as some of these demands seem, they are contractually valid. A contract consists of three parts: the offer, the acceptance, and the consideration. Offer and acceptance are easy enough to understand: "The X Factor" offered Britney Spears a job and she accepted. Consideration is the benefit the contractor will receive from the agreement. In the case of the Spears deal, the consideration is the work Britney will put in as a judge. Her rider, Doritos and Snickers bars and so forth, is enforceable because she’s giving something in exchange for it.
That said, these kinds of contractual demands are often taken less seriously than other, more substantive ones. J. Lo. may have demanded a white couch in her dressing room, but she reportedly settled for a green one. The cost of going to court and paying legal fees on something so trivial likely outweighs any value that could eventually come out of litigation, so those people who have a profile high enough to make such demands probably won’t bother arguing about them in front of a judge. Still, they can likely settle for having enough influence to be able to make them in the first place.
By Elspeth Crawford
Wage garnishments are governed by an array of state and federal laws, and employers are often confronted by demands from multiple garnishors who all insist that they be paid now. Although the law requires that a significant amount of information be sent to employers along with a demand for wage garnishment, there are some rules that may not be explained by that material.
How Is The Garnishment Obtained?
In a nutshell, here's how wage garnishment works. A person or entity obtains a judgment in court against an employee or a government agency determines that an employee owes a debt to them. Typically, the judgment relates to child support, unpaid taxes, or student loans. The person or entity to whom the debt is owed is the "garnishor." The employee is the "debtor." The garnishor then applies to a court (if it is a private entity) or goes through an administrative process (if it is a government agency) in order to get a "writ" for garnishment of wages. The writ is essentially the document which gives the garnishor the green light go go after the debtor's wages. That writ is delivered to the employer, as the entity controlling what is paid to the debtor, making the employer the "garnishee."
When must an employer start paying on the writ?
An employer is required to begin paying on the writ when it is received, unless there are other writs with higher priority (see below). An employer must return a statutory response form within seven days of receiving the writ whether or not the employer will start paying on the writ immediately. Payments are made every time that the employee gets paid and should be prorated if the writ was not in effect for the full pay period.
Can an employee challenge a writ?
The employee receives a copy of the writ of garnishment sent to the employer. The time period varies from state to state in which the employee may challenge the writ by sending a challenge to the garnishor. Once the employer gets notice that there is a challenge,the employer must not stop paying. Instead, the employer should send payments (on the same schedule) to the court that authorized the writ, rather than the garnishor. The court will hold the money until the challenge is resolved.
Was the writ sent to the proper employer?
The statutory response form contains several grounds pursuant to which an employer may contest the payment demanded in the writ. The most common objection is that the garnishee is not in fact the employer of the debtor. The employer should contact legal counsel if it has questions about whether it is the proper garnishee to ensure that it is complying with all legal requirements.
How much can be taken out of the employee's wages?
There is a cap on wage garnishment of 25% of take-home income. In addition, there is a "floor" level of income protected from garnishment that is based on a minimum wage per week. The statutory garnishment calculation worksheet that will accompany the writ will guide the employer through the proper calculations.
When can the employer stop paying on the writ?
Generally, writs of garnishment expire, whether they have been fully paid or not, within a time set by state law. However, writs issued by a county or county agency, and federal student loans writs, do not expire until paid in full. In general, writs may be "continued" only by a new writ; that is, the garnishor has to supply the employer with a new wage garnishment order in order to continue having the employee's pay garnished. The 90-day clock does not start running until payment on the writ has started.
What if there are multiple garnishments?
Most of the confusion surrounding wage garnishment occurs when an employer receives more than one garnishment for an employee. The general rule is "first in time, first in right." That is, the first garnishment order gets priority and gets paid first. If the first garnishment is taking the full amount allowed -- 25% -- then the second writ has to wait until the first writ expires (varies between states). However, if the first writ is nottaking the full 25%, then the employer must start paying on the second writ at the amount below 25% that is not being taken. One notable exception is for child support garnishments. These take priority over other garnishments, and will "bump" garnishments that are currently being paid.
How does the employer handle federal student loan garnishments?
There are special rules for federal student loans. Federal student loan garnishment orders are not subject to state law.
However, federal student loan garnishment orders are capped at 10% of income. Consequently, if another garnishment writ comes in while a federal student loan garnishment is being paid, the employer must begin paying on the second writ at 15% of income.
If the employee is being garnished on another writ at 25% when the federal student loan garnishment order comes in, the employer does not need to begin paying on the student loan garnishment. In that event, however, the employer should contact the agency that issued the student loan garnishment order, or contact the Department of Education student loan compliance center at (404) 562-6013 and follow up with a letter to:
U.S. Department of Education
Administrative Wage Garnishment Compliance Branch
61 Forsyth Street, Room 19T89
Atlanta Federal Center Tower
Atlanta, Georgia 30365.
The compliance center's advice will most likely be to begin paying on the student loan garnishment when the prior writ expires under state law.
How does the employer handle tax and child support garnishments?
Complications arise when IRS tax levies or child support garnishments conflict with each other or other wage garnishment orders. IRS tax levies and child support garnishments typically take priority over other garnishments, including federal student loan garnishments. An employer should contact the issuing agency (the IRS or the child support enforcement office) for advice specific to the type of garnishments in conflict. If questions remain, the employer should contact legal counsel to ensure that it is not later held liable to both the employee and the garnishor for failing to properly assign priority among claims or for over- or under-paying the garnishments.
Garnishments are an extra burden on an employer, but it is essential that they be dealt with correctly. Otherwise, an employer could be held liable both to the employee and the garnishor for any errors. However, seeking and taking advice can make most garnishments a routine part of personnel management. Finally, an employer should remember that, under federal and state law, an employee cannot be discriminated against or terminated because of wage garnishments.
By Elspeth Crawford
If your lawyer has acted in a way that resulted in your financial loss and violated the lawyer’s code of professional ethics, you may be entitled to recover under a legal malpractice claim. Like medical malpractice claims, legal malpractice claims are usually paid by a malpractice insurer. If you have been wronged by your attorney, a legal malpractice suit may give you a chance at getting remuneration.
Lawyers owe duties to clients which they can be punished for breaking. The duties are set by each state’s individual bar association and change slightly location by location, but ordinarily lawyers must:
Attorneys have many ethical duties, but these are some of the most important and commonly litigated.
Malpractice claims come in a few different varieties. Three of the most common are claims stemming from a lawyer’s negligence, a breach of a fiduciary duty, or a breach of contract.
Negligence. If a lawyer has done something they should not have done or failed to do something they should have, they may have been negligent. Negligence is judged by the standard of care a competent attorney would use under like circumstances. A lawyer might be negligent if he or she misses an important court date, fails to file a case within the prescribed statute of limitations, fails to follow a court order, or does not prepare adequately for trial.
Like in all negligence cases, proving liability isn’t as simple as showing that a lawyer made a mistake. Plaintiffs must show that the lawyer owed a duty to them, that the lawyer breached the duty, and that the breach resulted in some form of financial harm to the plaintiff. Showing a link between the breach and a financial harm can be difficult, so make sure that you have a competent legal malpractice lawyer capable of convincingly forecasting loss.
Breach of a Fiduciary Duty
Lawyers are bound to act with a high degree of honesty and loyalty and in the best interests of their clients. This is called their fiduciary duty, and breaching it can be grounds for a malpractice lawsuit. A lawyer can breach his or her fiduciary duty by representing another client whose interests are averse to the injured client, lying to the client about important information, inappropriately using money that belonged to the client, or making improper sexual advances toward a client.
Breach of Contract
Breach of contract cases are brought against lawyers who violate the terms of their specific agreements with their clients. Obviously, the circumstances of this will change depending on what kind of agreement the lawyer and the client made. If, for example, the case involves a bankruptcy, the lawyer could be sued for failing to file the client’s schedules as agreed.
In order to show liability in a legal malpractice case, the plaintiff must show that they would have won the underlying case if the lawyer had not been negligent, breached his or her fiduciary duty, or breached a contract. This is not an easy thing to prove, so claims for legal malpractice can be particularly difficult to litigate. Insurers know this, so such claims tend to settle less often than do claims in other areas of law. This should not deter you from filing suit if you think you have a case, but know that the life of a legal malpractice suit can be a difficult one.
Alternatives to Legal Malpractice
If you think your lawyer has wronged you, legal malpractice is not your only option. Here are some alternatives:
By Elspeth Crawford
When someone files for bankruptcy, they receive what is called an automatic stay. The automatic stay is a powerful tool which prevents creditors from collecting debts from the bankruptcy estate while the bankruptcy is in progress. For example, a creditor might be threatening to repossess your car because of your failure to pay a car loan, but after the automatic stay kicks in the repossession process will be stopped dead in its tracks. The purpose of the automatic stay is to give the bankruptcy debtor a break from the hounding of creditors and let them have a chance at a fresh start.
What Will the Automatic Stay Stop?
The automatic stay will protect debtors from many of the various ways creditors use to collect debts. Specifically, it will stop:
Creditors will willfully violate the automatic stay can be sanctioned with damages, costs, attorneys’ fees and, under certain circumstances, even punitive damages. Once a creditor has notice of the automatic stay, they must abide by it or face the consequences.
What Will the Automatic Stay Not Stop?
The power of the automatic stay is potent but not unlimited. There are several actions which the automatic stay will not stop. These include:
Also note that the automatic stay is designed to protect only the debtor who has filed for bankruptcy. If there is a situation where such a debtor is a co-defendant alongside someone else, only the debtor will be protected from the lawsuit by the automatic stay. There are exceptions to this rule. Specifically, if a co-defendant is so closely related to the debtor such that a proceeding against the former would affect the bankruptcy estate, say for instance if the co-defendant were a wholly owned subsidiary of the debtor, then the co-defendant may be covered by the automatic stay as well.
There are also limits on the effectiveness of the automatic stay that kick in if you’ve filed for bankruptcy before. If you filed a bankruptcy that was dismissed by the court in the 12 months prior to filing another bankruptcy, the automatic stay is good for only 30 days. If you had 2 or more bankruptcies dismissed in the twelve months prior to filing another bankruptcy, there is no automatic stay. A court could still grant you an automatic stay if you file a motion setting out why you need one, but you’ll have to fight harder for it than you would have were this your first bankruptcy.
When Will Relief From the Automatic Stay be Granted?
The automatic stay doesn’t last forever and will end when:
In certain circumstances, creditors can also request that the stay be lifted. For example, a creditor can request that the stay be lifted if the stay does not give them adequate protection in some property in which they have a significant interest. Determining whether their interest is significant enough depends on the property involved and the skill of the lawyers who are making arguments. If you decide to file for bankruptcy, it’s a good idea to retain a lawyer who can advise you on how best to make use of the automatic stay.
By Elspeth Crawford
If you’re involved in a car accident, there’s a chance that you might file a personal injury lawsuit or that one could be filed against you. In order to win a personal injury lawsuit involving a vehicular accident, the plaintiff must show three things. First, the plaintiff must show that he or she suffered actual harm. Usually, this will not be difficult. The plaintiff must simply identify their injuries. Second, the plaintiff must show that the defendant owed a duty of care but that the defendant breached this duty. Third, the plaintiff must show that the defendant’s breach of the duty of care was the cause of the plaintiff’s harm.
Duties of Care
Drivers are required to use that degree of care as would a reasonably prudent driver acting in similar circumstances. The details of the duty of care change slightly depending on what kind of vehicle is being driven, who is driving it, and whether or not the vehicle is commercial. However, many basic rules remain the same. Drivers have the duty to:
In cases where an injury is clearly caused by a driver’s negligence, showing causation is easy. In cases where the origin of injuries is not so clear, it can be more difficult. There are a number of tests courts used to determine injury. They vary depending on the state and the situation.
Contributory and Comparative Negligence
In order for a plaintiff to recover from a defendant in an automobile accident, the defendant must have acted negligently, that is, in violation of some duty of care. However, it is possible that the plaintiff also acted negligently and that the defendant is only partially, but not entirely, to blame for the accident. The doctrines of contributory and comparative negligence determine how to spread the blame when this occurs.
By Elspeth Crawford
The Pre-incorporation Checklist (PIC) is an attorney-drafted agreement used by individuals and entities prior to forming a corporation. The PIC lays out material terms between the prospective shareholders so that there is no confusion once the corporation is actually formed. The goal of the PIC is to lay out the essential and material terms between the prospective shareholders so that there is no confusion once the corporation is actually formed.
Having a PIC can facilitate the process of exploring pre-incorporation considerations with the principals of the corporation and gathering the information necessary to prepare organizational documents for the corporation.
Such a checklist should cover such things as:
Capitalization of the Corporation:
Management of Corporation: