Tenants often sublease the property they are leasing to a subtenant. Generally, the tenant and subtenant enter into a new contract (sublease), and the original lease between the landlord and tenant (master lease) remains intact. When this happens, the relationship between the landlord and tenant is unchanged: they are still in privity of contract (the parties are bound to the terms of the master lease) and in privity of estate (the parties are bound by the covenants that run with the land). And, the tenant and subtenant are now also in privity of contract.
Unfortunately (or fortunately) for landlords and subtenants, a sublease does not create any relationship between them absent an express assumption of the obligations of the master lease. In other words, the subtenant is not liable for any breach of the master lease, and the subtenant cannot enforce any terms or covenants in the master lease. The only recourse the landlord and subtenant have for breach of the master lease terms or any covenants is against the tenant.
To clarify, suppose A, an owner of property, leased the property to B. B (the tenant), decides to sublease the property to C, and B and C enter into a sublease. Despite the sublease, A and B remain in privity of contract and privity of estate. A and B may therefore bring claims against each other arising out of a breach of the lease terms or covenants. B and C are also in privity of contract and may bring claims against each other arising out of the breach of the sublease terms only (not on any covenants that run with the land). A and C, on the other hand, are not in privity of estate or privity of contract. Therefore, A and C may not bring any claims against each other arising out of either of the leases.
As a landlord, tenant, or subtenant, it is important to know the relationship that exists, or does not exist, between the other parties. To avoid issues arising out of any subtenancy, many landlords prohibit their tenants from subleasing. When subleasing is permitted, however, tenants should be aware that they remain liable to the landlord if the subtenant fails to pay rent, or otherwise breaches the master lease. Moreover, tenants may protect themselves from liability by requiring the subtenant to expressly assume the obligations arising out of the master lease.
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For more information or help with your dispute, contact Schorr Law, APC, www.schorr-law.com, 310-954-1877, firstname.lastname@example.org
By C. Mina Kim, Esq.