Making a Lease’s Anti-Assignment Clause Enforceable

Connecticut Supreme Court: Lease Terms

Most commercial real estate leases contain an anti-assignment clause.  Such provisions prohibit any assignment of the lease without the permission of the landlord.  Often the lease will state that the requisite permission will not be unreasonably withheld; other times, the granting of permission remains in the sole discretion of the landlord.  A decision of the Connecticut Supreme Court has placed a significant judicial gloss on the effect of these traditional lease terms and commercial landlords and tenants should be aware of the new rules of the game.

David Caron Chrysler Motors LLC v. Goodhall’s, Inc., 304 Conn. 738 (2012)

In David Caron Chrysler Motors LLC v. Goodhall’s, Inc., 304 Conn. 738 (2012), a landlord leased commercial property to a limited liability company tenant.  The lease contained the typical “no assignment without landlord consent which will not be unreasonably withheld” language.  The tenant assigned the lease to the plaintiff without the landlord’s consent.

Findings

The plaintiff brought suit claiming that the landlord had violated the lease.  The trial court found that the absence of landlord consent to the earlier assignment of the lease precluded a finding of an enforceable contract (i.e., lease) between the parties.  The Connecticut Supreme Court reversed the decision below.  It found that because the particular anti-assignment clause did not also state that any assignment would be rendered void or invalid, the challenged assignment was merely “voidable.”  The court found significant the fact that the landlord never sought to invoke its option to void the lease, post assignment.  Thus, the landlord remained bound by the lease, albeit with a new, assignee tenant.

Conclusion

The take-away from David Caron Chrysler Motors, LLC, is that landlords should adopt a “belt and suspenders” approach to drafting anti-assignment clauses.  The lease should expressly state that (a) there is to be no assignment of the lease without landlord consent, and (b) any purported assignment of the lease in violation of such provision shall be void.  The absence of such additional, clarifying language can result in a landlord having to accept a previously unacceptable assignee tenant.

The commercial litigation attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience in the negotiation and litigation of all sorts of business-related disputes and assist clients from Greenwich, Stamford, New Canaan, Darien, Norwalk, Westport and Fairfield and resolving such issues.