Don't Get Stuck with Commissions/Taxes Related to Assignment/Sublet

If a tenant assigns its lease or sublets its space, you could get stuck with a big bill for a brokerage commission or transfer taxes. For example, you may have a listing agreement with a broker that entitles it to a commission for any transaction involving your building or center. Or a tenant may fail to pay real estate transfer taxes due on an assignment and leave you with the problem of getting rid of the resulting lien on your building or center. Paying brokerage commissions and real estate transfer taxes could get very expensive, especially since assignments and sublets are increasingly popular as more and more tenants try to downsize or cut costs.

Get Agreement that You're Not Liable

To protect yourself, make the tenant and its assignee or subtenant agree that you're not liable for paying any brokerage commissions and real estate transfer taxes resulting from the tenant's assignment or sublet, advises Dallas attorney T. Andrew Dow. And make it clear that they must reimburse you for any commissions or taxes you must pay as a result of their transaction.

Dow suggests that language saying this should appear in two documents:

Assignment agreement/sublease. Have the tenant add the language to the assignment agreement or sublease it signs with the assignee or subtenant, says Dow.

Your assignment/sublet consent form. Add the language to your consent form and then have the tenant and its assignee or subtenant sign that form, says Dow.

Having protective language in these two documents makes it easier to demand that a tenant reimburse you for any brokerage commissions or real estate transfer you must pay as a result of their transaction, explains Dow.

What Language Should Say

Have the tenant add the following language to its assignment agreement or sublease and add it to your assignment/ sublet consent form, advises Dow:

Model Language

Tenant and [Assignee/Subtenant] hereby agree that Landlord shall not be liable for any real estate transfer taxes, any leasing commission, or other amounts which may be due to a broker or agent with respect to the [Assignment/ Sublease Agreement]. [Assignor/ Sublandlord] and [Assignee/Subtenant] hereby jointly and severally indemnify Landlord against any claims for such transfer taxes or brokerage or leasing commission which may be due as a result of the transaction which is the subject of this Consent.

CLLI Source

T. Andrew Dow, Esq.: Member, Winstead Sechrest & Minick PC, 5400 Renaissance Tower, 1201 Elm St., Dallas, TX 75270-2199; (214) 745-5400; ADow@winstead.com.