California Commercial Lease

Commercial leases typically include restrictions on transferability, namely that the tenant may not assign the lease without the consent of the owner. After the California Supreme Court involves a requirement of reasonableness in contract lease provisions consent (where none existed before), the California legislature adopted a statutory scheme relating to the transfer and sub- commercial leasing.

Evolution of the Law

The majority of jurisdictions, including California, long argued that if a lease contains an approval clause (a clause stipulating that the lease can not be assigned without the prior consent of the owner), the owner may refuse to approve an assignee proposed, although the avoidance of arbitrariness and the proposed tenant was perfectly suited.

Over time, many courts tend to a reasonable standard, namely that there must be a commercially reasonable objection to the assignment. California Supreme Court, in an opinion entitled Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488, adopted the reasonableness standard, saying an unreasonable refusal to award constituted unreasonable restraint on alienation.

The court ruled that the trier of fact may properly consider the following factors in determining reasonableness: the financial responsibility of the proposed transferee, the relevance of the use of such property, the legality of the use proposed the need for change of premises and the nature of the occupation, ie, office, factory, clinic, etc. However, the Court ruled that denial solely on the basis of personal taste, comfort or sensitivity was not commercially reasonable. It was unreasonable to withhold consent to the landlord can charge a higher rent than the original contract.

Justice Lucas, in a dissenting opinion, noted that the lease if Kendall does not need a reasonable level. Or if the legislature had adopted such a requirement. Justice Lucas deemed unfit for the Court to imply a requirement of reasonableness when the Legislature had in fact expressly declined to do so and that the parties had not contracted for it. "Absent legislative direction, the parties should be free to contract as they see fit." 40 Cal.3d 508.

statutory scheme of the Legislature

In response to the case Kendall, the California Legislature weighed into the debate with a comprehensive statutory scheme governing the assignment of commercial leases.

In general, without express limitation, the interest of a tenant in a commercial lease is freely assignable. Civ.C. Ās 1,995,210. The law, later codified by the law also stipulates that any ambiguity in a restriction on the transfer of the interest of a tenant in a lease must be construed in favor of portability. Civ.C. Ās 1,995,220. On the other hand, if the parties agree, a party may absolutely prohibit transfer. Civ.C. Ās 1,995,230.

Owner's consent

A provision commonly used in the lease requires the consent of the owner is required to transfer the interest of the tenant. The legislature has also addressed this issue by finding that a restriction on a lease may require the landlord's consent subject to any express standard or condition of giving or withholding consent, including but not limited to either (a) the landlord's consent can not be unreasonably withheld, or (b) the landlord's consent may be accepted subject to express standards or conditions. That consent has been unreasonably withheld is a question of fact to be determined according to established case law. For example, as noted in the case Kendall, the basics of good faith reasonable objection to understand "the inability to fulfill the conditions of the lease, financial irresponsib.