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Consent to Lease Assignment – Do I Really Have to be Reasonable?

Posted in Leasing

Most leases contain an assignment provision providing that a tenant must obtain their landlord’s consent prior to assigning (or subletting) its interest in a lease.  However, if the lease is silent regarding the standard of Landlord’s consent, must the landlord be reasonable in granting or withholding that consent?  The answer: it depends on when the lease was signed.

For leases that were executed on or after September 23, 1983, a landlord must have a commercially reasonable objection to the proposed assignee or subtenant, or to their proposed use.  The cases Cohen v. Ratinoff, 147 Cal. App. 3d 321 (1983), and Kendall v. Ernest Podesta, Inc., 40 Cal. 3d 488 (1985), reversed prior state law which had previously allowed landlords to withhold consent in their sole and absolute discretion, without the need to be reasonable. That holding was codified in California Civil Code (“Code”) §1995.260, which states that in the absence of a standard for giving or withholding consent, the transfer restriction will be constructed to include an implied standard that the landlord’s consent may not be unreasonably withheld.

For leases that were executed prior to September 23, 1983, and with assignment provisions that do not include a standard for landlord consent, landlords may be unreasonable when withholding their consent (See Code §1996.270 – legislative findings and declarations- confirming that Code §1995.260 does not apply retroactively to leases executed prior to the date of the Cohen case).

To avoid having a jury determine whether a landlord was acting reasonably when withholding consent, for new leases, it is always advisable to include specific examples of what constitutes grounds for a landlord to reasonably withhold its consent to a requested assignment; the Kendall case provides many such examples.