Assigning or Subletting a Commercial Lease in California: When the Landlord May Refuse Consent

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

A restriction on transfer is the clause in a commercial lease that decides whether the tenant may assign the lease or sublet the space. In California the lease may bar transfers outright, set express conditions, or require the landlord's consent. If it requires consent and states no standard, consent may not be unreasonably withheld, and the tenant must prove that a refusal was unreasonable. (Civ. Code, §§ 1995.230, 1995.260.) So a landlord can sometimes block a sale. Kolmogorov Law, P.C. litigates these disputes.

Call (909) 235-6116 or contact us online to discuss a refused assignment or sublease, or a transfer made without consent.

What the transfer statutes cover

A chapter of the Civil Code governs transfer restrictions in leases of real property for other than residential purposes. (Civ. Code, § 1995.020, subd. (b).) This page is about commercial space only.

A transfer means an assignment, a sublease, or any other voluntary or involuntary transfer or encumbrance of all or part of the tenant's interest. (Civ. Code, § 1995.020, subd. (e).) Two default rules favor the tenant. Unless the lease restricts transfer, the tenant may transfer freely. An ambiguity in a restriction is construed in favor of transferability. (Civ. Code, §§ 1995.210, subd. (b), 1995.220.)

Four kinds of transfer clauses

Past those defaults, the wording controls.

No clause. The tenant's rights include unrestricted transfer.
Absolute prohibition. A lease may forbid transfers altogether. (Civ. Code, § 1995.230.)
Express standards or conditions. A lease may subject a transfer to any express standard or condition. That includes a term giving the landlord some or all of what the tenant receives from the transferee above the lease rent. (Civ. Code, §§ 1995.240, 1995.250.)
Consent with no standard. The law implies that consent may not be unreasonably withheld. (Civ. Code, § 1995.260.)

The last rule applies to restrictions signed on or after September 23, 1983. Under an older restriction that states no standard, the landlord's consent may be unreasonably withheld. (Civ. Code, § 1995.270, subd. (b).) The date can still matter for a long ground lease.

Recapture and profit-sharing clauses

Some leases answer a transfer request with a different remedy: the landlord may terminate the lease and take the space back. The California Supreme Court enforced a clause of that kind. The landlord ended the lease after the tenant proposed a transfer, so that it could capture the increased rental value itself. The court held that the clause was a reasonable restraint. It also held that the landlord did not breach the implied covenant of good faith, because the lease expressly allowed what it did. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342.)

The practical lesson is about sequence. Read the clause before sending a request for consent, because the request itself may give the landlord the right to recapture.

When a sale of the business counts as a transfer

An asset sale that includes the lease moves it to a new tenant, so the transfer clause applies. A sale of the company's stock or membership interests leaves the same entity as tenant. Whether that is a transfer depends on the lease. Some leases define a change in ownership or control as a transfer that needs consent. A lease that says nothing on the point may leave room for the tenant's reading, since ambiguity favors transferability. (Civ. Code, § 1995.220.)

Check the clause before the letter of intent is signed, not during escrow. A buyer who learns late that the landlord can refuse may reprice the deal or walk away. Our guide to buying or selling a small business covers the rest of the sale.

If you are the tenant

Make the request in writing and make it complete. Include the proposed transferee's financial statements, operating history, and intended use, with the terms of the transfer. If the landlord refuses or stalls, send a written request for a statement of its reasons.

That second letter matters. Whether consent was unreasonably withheld is a question of fact, and the tenant has the burden of proof. The tenant can meet it by showing that the landlord, after a written request for its reasons, failed within a reasonable time to state a reasonable objection in writing. (Civ. Code, § 1995.260.)

If the lease requires consent that may not be unreasonably withheld and the landlord withholds it unreasonably, the tenant has contract remedies, including damages caused by the breach and the right to terminate the lease. An express lease term can limit those remedies. (Civ. Code, §§ 1995.300, 1995.310.) A tenant who needs an answer before a closing date can also ask a court for declaratory relief.

Do not transfer first and argue later. A transfer that violates the restriction gives the landlord damages and the right to terminate. The assignee becomes jointly and severally liable with the tenant for those damages. The landlord may also end the transfer alone and remove the assignee or subtenant through the unlawful detainer process. (Civ. Code, §§ 1995.320, 1995.330.)

If you are the landlord

Answer every request in writing, and give reasons. Tie each reason to a standard in the lease or to a concrete concern about the transferee, such as its finances or its proposed use. A refusal with no stated reason can hand the tenant its proof.

Consent to one transfer does not give up the restriction for the next. The restriction continues to apply to later transfers by the tenant, an assignee, or a subtenant, unless the lease limits it to the original tenant or the landlord says otherwise in writing. (Civ. Code, § 1995.340.)

A transfer clause also affects the landlord's remedies if the tenant later abandons. The right to keep the lease in force and collect rent as it comes due depends on the tenant's ability to assign or sublet. Our page on breaking a commercial lease early explains that remedy and what courts have said about refusing consent to obtain higher rent.

What to bring to the first meeting

The lease, every amendment, and any guaranty.
The letter of intent and the purchase agreement or sublease.
The written consent request, the transferee's financial information, and the landlord's responses.
The closing date and any financing deadlines.

Frequently asked questions

We want to sell our restaurant and assign the lease, but the landlord will not consent. Can the landlord block the sale?

It depends on the transfer clause. A California commercial lease may prohibit assignment outright, and then the landlord can block an asset sale that depends on the lease. If the lease requires consent without stating a standard, consent may not be unreasonably withheld. (Civ. Code, § 1995.260.) An unreasonable refusal gives the tenant damages and a right to terminate, but that may come too late to save a closing.

Can a commercial landlord refuse a sublease in California?

Yes, if the lease allows it. California law lets a commercial lease forbid subleases entirely or set express conditions on them. (Civ. Code, §§ 1995.230, 1995.240.) Where the lease only requires the landlord's consent and gives no standard, the landlord may refuse on reasonable grounds but not unreasonably. These rules apply to leases of nonresidential property.

Who has to prove that the landlord's refusal was unreasonable?

The tenant. Under California Civil Code section 1995.260, whether a commercial landlord unreasonably withheld consent is a question of fact, and the tenant carries the burden of proof. The statute gives the tenant one direct route. It may show that the landlord was asked in writing for its reasons and did not state a reasonable objection in writing within a reasonable time.

Our lease says the landlord can take back the space if we ask to assign it. Is that clause enforceable in California?

Generally, yes. The California Supreme Court upheld a commercial lease clause that let the landlord terminate the lease when the tenant requested consent to a transfer, even though the landlord acted to capture higher rent for itself. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342.) Because the lease expressly permitted the termination, the implied covenant of good faith did not forbid it.

What happens if a tenant assigns a commercial lease without consent?

The landlord gains remedies. Under California law, a transfer that violates the lease's restriction entitles the landlord to contract damages and to terminate the lease. The assignee is jointly and severally liable with the tenant for those damages. The landlord may instead end only the transfer and evict the assignee or subtenant. (Civ. Code, §§ 1995.320, 1995.330.)

Talk to a California commercial lease attorney

If a landlord is holding up a sale or sublease, or a tenant has transferred space without consent, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. represents landlords and tenants of commercial property from its office in Irvine, California. It takes matters in Orange County, Los Angeles, San Diego, San Francisco, Santa Clara, Alameda, and Contra Costa counties and in the federal courts in California.

Related reading: our real estate litigation practice, the commercial lease disputes guide, and contract assignment disputes.

This page provides general information about California law and is not legal advice. Outcomes depend on the lease, the facts, and the court.