Don't Agree that Prospective Subtenant/Assignee Must Be 'Creditworthy'

June 6, 2012
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The owner of the space you want to rent may want the lease to require that a prospective subtenant or assignee be “creditworthy.” But agreeing to meet this requirement may give you a lot of unnecessary headaches. That's because the word “creditworthy” is so vague and subjective that you and the owner may greatly disagree about what assets a prospective subtenant or assignee must have to meet that requirement. So you and the owner could end up in court if you believe that your prospective subtenant or assignee is creditworthy but the owner thinks otherwise.

A good way to prevent these problems is to have the lease say instead that a prospective subtenant or assignee must have “a tangible net worth [or shareholder's equity] of at least $[
insert amt.]” as of the date of the proposed sublet or assignment. This way, you and the owner have a clearer and more objective guideline to follow.

For more “Dos & Don’ts” relating to sublets and assignments, see the June 2012 issue, available on our homepage.