[WSBARP] WA "Anti-SubLease Clause" - Does it "VOID" the Lease K?

[Eric Nelsen]

Victor--Covenant prohibiting subleasing is probably enforceable, but is strictly construed. A sublease made in violation of the master lease is voidable by the master landlord. Other remedies may be available depending on what the lease says.


From the WSBA Real Property Deskbook Vol. 1 Ch. 17.11(1)(b) (4th ed. 2009):

(b)  Tenant's covenants against transfer

Covenants restricting or prohibiting assignment or subleasing are direct restraints on alienation, but generally have been upheld. 1 AMERICAN LAW OF PROPERTY §3.58 (A. James Casner ed., 1952). Though covenants restricting tenants' transfers may be valid, they still are strictly construed, because they offend the policy against restraints on alienation. On this ground, it has been held in Washington that a covenant not to "assign" does not restrict subletting, and a covenant prohibiting a "sublease" does not inhibit assignment. Burns v. Dufresne, 67 Wash. 158, 121 P. 46 (1912) ("assign"); Willenbrock v. Latulippe, 125 Wash. 168, 215 P. 330 (1923) ("sublease"). Covenants against subletting the "whole of the premises," or words to that effect, do not prevent subletting a part of them. Cuschner v. Westlake, 43 Wash. 690,286 P. 948 (1906) (alternative ground). A covenant against assignment prohibits the tenant's separately assigning a purchase option contained in the lease. Behrens v. Cloudy, 50 Wash. 400, 97 P. 450 (1908). But cf. Oregon-Wash. R.R. & Navigation v. E. Or. Banking Co., 81 Wash. 617, 143 P. 154 (1914).

Where assignment or subletting is restricted, the qualification is often added, "except with the landlord's prior (written) consent." With such language, the landlord may give or withhold consent arbitrarily, without offering a reason. Coulos v. Desimone, 34 Wn.2d 87, 208 P.2d 105 (1949). Sometimes, however, there is further language, such as "consent shall not be unreasonably withheld" or "landlord shall consent" if the assignee meets certain standards. In Hedgecock v. Mendel, 146 Wash. 404, 263 P. 593 (1928), the court held that a phrase such as "landlord shall consent" is a covenant by the landlord that is specifically enforceable by the tenant. Where the lease says that the landlord's consent "shall not be unreasonably withheld," Division I has held that the landlord will be held to a standard of a "reasonably prudent person in the landlord's position." Ernst Home Ctr., Inc. v. Sato, 80 Wn.App. 473, 486, 910 P.2d 486 (1996). The facts of the Ernst case impose a high standard on any landlord that has agreed to a standard of reasonableness and then wishes to withhold consent.

If the tenant purports to make an assignment that is forbidden by the lease, the assignment is good as between the assignor and the assignee but is voidable by the landlord. OTR v. Flakey Jake's, Inc., 112 Wn.2d 243, 770 P.2d 629 (1989); see also Morrison v. Nelson, 38 Wn.2d 649, 231 P.2d 335 (1951). The assignee specifically acquires the duty to pay rent to the landlord. Nat'l Bank of Commerce v. Dunn, 194 Wash. 472, 78 P.2d 535 (1938). If the assignee pays rent and the landlord accepts it knowing of the assignment, then the landlord has no legal remedy on account of the prohibited assignment. Field v. Copping, Agnew & Scales, 65 Wash. 359, 118 P. 329 (1911). When a tenant improperly assigned its lease in violation of the lease terms, the landlord could declare the assignment void and maintain an unlawful detainer action to regain possession of the premises. Bellevue Square Managers, Inc. v. GRS Clothing, Inc., 124 Wn.App. 238, 98 P.3d 498 (2004). If the lease contains a clause allowing the landlord to forfeit (terminate) for breach of a nonassignment clause, the landlord may terminate the lease because of the tenant's wrongful assignment, assuming, of course, the landlord has not accepted the assignee. Boyd v. North, 114 Wash. 540, 195 P. 1011 (1921).

Practice Tip:        Although there may be no Washington case that decides its effectiveness, it is nonetheless common to provide that any assignment or sublease made in violation of a provision of the lease will be void.

In English common law, when the landlord's consent to assignment is required and it gives consent to one assignment, further assignments by the assignees may be made without consent. Dumpor's Case, 4 Coke 1196, 76 Eng. Rep. 1110 (King's Bench 1603) (one consent destroys the condition, so that consent is not thereafter required). Most American cases on the issue say they follow the rule in Dumpor's Case, but in fact create various exceptions to it. See 1 AMERICAN LAW OF PROPERTY §3.58 (A. James Casner ed., 1952). In Washington the force of Dumpor's rule is not settled, although it was repudiated in the strong dictum in Puget Mill Co. v. Kerry, 183 Wash. 542, 49 P.2d 57 (1935). As the court phrased it, the covenant restricting assignment should "run with the land" (the leasehold estate), so as to bind assignees. In a Washington case on a fact pattern opposite that in Dumpor's (several assignments were made without the required landlord's consent, then a final assignment was made with his consent), the final assignment was held valid. Hartford v. Faw, 166 Wash. 335, 7 P.2d 4 (1932).


Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040



From: wsbarp-owner at lists.wsbarppt.com [mailto:wsbarp-owner at lists.wsbarppt.com] On Behalf Of Victor R
Sent: Wednesday, January 28, 2015 9:18 AM
To: WSBA RPPT Real Property Discussion Forum
Subject: [WSBARP] WA "Anti-SubLease Clause" - Does it "VOID" the Lease K?

Members:

Any of you run into this 'problem'?  Where a Lessor writes in a Clause that the lease agreement is NOT SUBLEASE-'ABLE' ?

Another Hypo is:  Owner Rents-Out to Lessee / Lessee Rents-Out to Sub-Lessee but says "Sub-Lessee, YOU CANNOT Lease Out That Office I am leasing to you!"

What is the CURRENT case law on this?

What WAS the current case law on this, and SINCE WHEN?

I am trying to size up any potential litigation on this matter.

Thank you, a bunch.

Kindly,


--

Victor Ro, Esq.
THE RO FIRM, P.S.C.
A Professional Services Corporation
5400 Carillon Point
Bldg. 5000, 4th Floor
Kirkland, WA 98033
Tel:  (206) 319-7072
Fax: (206) 319-4470
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