Nature of the Lessee's Transfer of Possession
A lease gives the lessee the right to use or enjoy the thing leased for a price and for a period, but it does not make the lessee the owner of the property or of any greater right than the lease grants.
Sublease and assignment both involve a third person entering the possession or enjoyment of the leased property through the lessee, but they differ in juridical effect. A sublease creates a new lease between the lessee and the third person. An assignment of lease transfers the lessee's leasehold right, or the lessee's position under the lease, to another.
The main distinction is whether the original lease remains between the lessor and the lessee while a second lease is created below it, or whether the lessee attempts to substitute another person into the lessee's own place. The label used by the parties is relevant but not controlling; the substance of the transfer determines whether it is a sublease or an assignment.
The lessee cannot transmit more than the lessee has. A sublessee or assignee acquires only derivative rights, subject to the term, restrictions, conditions, and lawful termination of the principal lease.
Sublease
A sublease is a contract by which the lessee, as sublessor, leases the thing or a portion of it to a sublessee while the original lease between lessor and lessee continues to exist.
Under the Civil Code, the lessee may sublease the thing leased, in whole or in part, when the contract of lease does not expressly prohibit subleasing. This default rule treats sublease differently from assignment because a sublease does not, by itself, substitute the sublessee for the lessee in the principal lease.
The permission to sublease is subject to the lessee's continuing responsibility to the lessor. The lessee remains bound to pay rent, preserve the thing, use it according to the lease, return it at the proper time, and answer for breaches of the principal lease even if the immediate occupant is the sublessee.
A stipulation prohibiting sublease is valid. If the lessee subleases despite an express prohibition, the lessee violates the lease and may be liable for rescission, damages, ejectment when proper, and other consequences provided by law or contract.
A sublease may cover the whole property or only a portion. A partial sublease is common where the lessee retains part of the premises and allows another to occupy another part. A whole sublease may still remain a sublease if the lessee preserves the principal lease and does not transfer the lease itself as a substitute party.
Relations Created by Sublease
Sublease produces two related but distinct contractual relations. The principal lease remains between the lessor and lessee. The sublease exists between the lessee, now acting as sublessor, and the sublessee.
As a rule, the sublessee does not become the principal lessee of the owner merely because of occupancy. The lessor's consent to, knowledge of, or tolerance of possession by the sublessee may affect waiver or estoppel only when the circumstances clearly show recognition of rights inconsistent with objection.
The sublessor owes the sublessee the obligations of a lessor under their sublease, including delivery of possession and maintenance of peaceful enjoyment within the limits of the sublessor's own right. The sublessor cannot promise a term, use, or authority that the principal lease does not permit without risking liability to the sublessee.
The sublease is dependent on the principal lease. If the principal lease expires, is rescinded, is annulled, or is lawfully terminated, the sublease ordinarily falls with it because the sublessor's derivative authority has ended. The sublessee's remedy for premature loss of possession usually lies against the sublessor, unless the lessor independently assumed obligations in favor of the sublessee.
Subsidiary Liability of the Sublessee
The Civil Code imposes direct statutory consequences on a sublessee despite the absence of a full principal lease between lessor and sublessee. These consequences protect the lessor from being prejudiced by the lessee's decision to put another in possession.
The sublessee is subsidiarily liable to the lessor for rent due from the lessee. The liability is limited to the rent that the sublessee owes the lessee under the sublease at the time the lessor makes an extrajudicial demand.
This subsidiary liability does not make the sublessee an unlimited guarantor of the lessee. The sublessee answers only up to what remains owing under the sublease when the lessor makes the proper demand, and only because the law allows the lessor to reach that amount to satisfy the rent owed by the lessee.
Advance payments made by the sublessee to the lessee are not automatically effective against the lessor's claim. As against the lessor, such advance payments are generally treated as not made, except when they were made by virtue of the custom of the place.
After the lessor's demand, the sublessee should not defeat the lessor's statutory right by paying the lessee instead. Payment to the lessor within the amount due from the sublessee may discharge the sublessee to that extent against the sublessor because the payment satisfies a liability imposed by law.
The sublessee is also subsidiarily liable for acts concerning the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. This includes harmful use, misuse beyond the agreed purpose, or failure to observe restrictions in the principal lease when those matters affect preservation or proper use.
Assignment of Lease
Assignment of lease is the transfer by the lessee of the leasehold right or of the lessee's position under the lease to another person, called the assignee. It is directed to the lessee's own contractual status, not merely to the creation of a subordinate lease.
Under the Civil Code, the lessee cannot assign the lease without the lessor's consent, unless there is a stipulation to the contrary. The rule reflects the personal confidence involved in lease: the lessor may have considered the lessee's solvency, use, character, business, or manner of preserving the property.
Consent to assignment may be given in the lease contract itself, in a later written or oral authorization when legally sufficient, or by clear conduct showing acceptance of the assignee as holder of the lease. Mere knowledge that another person occupies the premises does not always equal consent to assignment, especially when the lessor's acts are consistent with preserving rights against the original lessee.
An unauthorized assignment is ineffective against the lessor and constitutes a breach of the lease. The lessor may refuse to recognize the assignee, hold the lessee liable for contractual breach, recover possession when the requirements for ejectment or rescission are present, and demand damages caused by the unauthorized transfer.
When the lessor consents to the assignment, the assignee acquires the leasehold right subject to the terms, burdens, limitations, and remaining period of the lease. Consent does not enlarge the lease, remove restrictions, extend the term, or excuse prior breaches unless the lessor clearly agrees to those effects.
Assignment is not automatically a novation releasing the original lessee from all obligations. A release of the lessee requires a clear intention to extinguish the old obligation or substitute the assignee as debtor in a manner accepted by the lessor. Accrued liabilities of the lessee remain enforceable unless validly waived or discharged.
Rights and Liabilities After Assignment
The assignee who accepts and enjoys the lease may be bound to comply with the lease obligations attached to the right assigned, especially payment of rent, use according to the agreed purpose, preservation of the property, and return upon termination.
The assigning lessee remains liable on obligations that have already accrued before assignment. Continuing liability after assignment depends on the contract, the lessor's consent, and whether the transaction also amounts to a novation or release.
The lessor may insist that the assignee observe all restrictions in the principal lease because the assignee's right is derived from that lease. The assignee cannot invoke personal arrangements with the assigning lessee to defeat conditions binding under the original lease.
If the assignment is valid but the assignee later defaults, the lessor's remedies may include collection of rent, rescission, damages, and recovery of possession according to the nature of the breach and the governing procedural remedy.
Comparison
| Point | Sublease | Assignment of Lease |
|---|---|---|
| Juridical act | Creates a second lease under the principal lease. | Transfers the lessee's leasehold right or position. |
| Need for lessor's consent | Allowed unless expressly prohibited by the lease. | Prohibited unless the lessor consents or the lease allows it. |
| Status of original lessee | Remains principal lessee and becomes sublessor. | Attempts to put the assignee in the lessee's place. |
| Relation with third person | Sublessor and sublessee are bound by a separate sublease. | Assignor and assignee are bound by the assignment, and the assignee may be bound to the lessor when recognized. |
| Liability to lessor | Lessee remains directly liable; sublessee has statutory subsidiary liabilities. | Assignee may be liable under the assigned lease; original lessee is not released absent novation or waiver. |
| Effect of end of principal lease | Sublease generally ends because it is derivative. | Assignee's right ends with the lease assigned. |
Consent, Prohibition, and Waiver
Contractual language controls the scope of the lessee's power to transfer. A clause allowing sublease does not necessarily allow assignment, and a clause allowing assignment does not necessarily allow unrestricted sublease or further transfers.
When consent is required, it must refer to the transfer involved. Consent to one transferee or one transaction does not automatically authorize later transfers, different occupants, a change of use, or a transfer of a larger right than the lessor approved.
Waiver of a no-sublease or no-assignment clause must be clear. Acceptance of rent, silence, or tolerance may be relevant, but waiver is not presumed when the lessor's acts can reasonably be understood as avoiding loss, preserving possession rights, or dealing with the original lessee as the accountable party.
If the lessor expressly recognizes the sublessee or assignee as direct lessee under a new arrangement, the legal relation may cease to be merely derivative. The result depends on the parties' intent, the terms accepted, and whether the original lease was terminated, modified, or novated.
Term, Use, and Extent of Transferred Rights
The sublessee or assignee takes the property subject to the remaining term of the principal lease. A sublease or assignment purporting to extend beyond that term cannot bind the lessor beyond the lessor's own undertaking.
The permitted use in the principal lease binds the sublessee or assignee. If the principal lease is for residential use, the lessee cannot validly authorize commercial use against the lessor. If the lease restricts alterations, hazardous activities, overcrowding, or transfer of possession, those limits follow the derivative occupant.
The lessee remains responsible for deterioration caused by persons admitted to the premises through the lessee, subject to the rules on ordinary wear and tear, fortuitous events, and the specific obligations assumed in the lease.
Registration or annotation of a lease, sublease, or assignment involving registered land protects only the rights that legally exist and are capable of binding third persons. Registration does not cure lack of authority to assign, does not validate a prohibited sublease, and does not give the transferee a greater right than the principal lease grants.
Remedies
The lessor's remedies against the lessee include collection of unpaid rent, specific performance of lease obligations when proper, rescission for substantial breach, damages, and recovery of possession through the appropriate action.
Against a sublessee, the lessor may enforce the statutory subsidiary liability for rent due from the lessee within the amount owing by the sublessee at the time of demand. The lessor may also rely on the sublessee's subsidiary liability for acts involving use and preservation of the thing according to the principal lease.
Against an unauthorized assignee, the lessor may deny recognition of the transfer and proceed against the lessee for breach. If the assignee is in possession without a right enforceable against the lessor, recovery of possession may be pursued when the lease and procedural requisites allow it.
The lessee-sublessor may proceed against the sublessee for unpaid subrent, violation of the sublease, misuse of the premises, or refusal to vacate when the sublease ends. The sublessee may proceed against the sublessor if the sublessor promised possession or a term that the sublessor could not lawfully provide.
The assignee may proceed against the assignor when the assigned leasehold right is defective, unauthorized, already breached, or materially different from what was transferred. The assignor's liability depends on the assignment agreement, warranties made, and general rules on obligations and contracts.
Practical Legal Effect
Sublease preserves the lessor-lessee relation and adds a subordinate lease; assignment attempts to transfer the lessee's position and therefore requires the lessor's consent unless the lease says otherwise.
In both cases, the third person's right is derivative. The sublessee or assignee cannot defeat the principal lease, ignore its restrictions, extend its term, or impose a new debtor on the lessor without the lessor's legally effective consent.
The lessee remains the central risk-bearer. By subleasing, the lessee keeps direct liability to the lessor while acquiring duties as sublessor. By assigning, the lessee may transfer enjoyment of the leasehold, but release from liability requires more than the mere fact of transfer.