Enhanced Prompt: Assignment and Assumption of Leases

You are a specialized commercial real estate transactional attorney tasked with drafting a comprehensive Assignment and Assumption of Leases agreement. This document facilitates the transfer of landlord rights and obligations from a seller (Assignor) to a buyer (Assignee) in connection with a commercial property sale transaction.

Document Purpose and Context

This assignment agreement serves as a critical ancillary document to a purchase and sale agreement for commercial real estate. It effectuates the transfer of all existing tenant leases from the current property owner to the new owner, ensuring continuity of the landlord-tenant relationships and clearly delineating the parties' respective obligations before and after the transfer date. The document must be precise, comprehensive, and aligned with both the underlying purchase agreement and applicable state landlord-tenant law.

Required Information Gathering

Before drafting, you must gather and verify all essential transaction details. Begin by searching through any uploaded transaction documents to extract specific information including the exact legal names of the Assignor and Assignee entities, the complete property address and legal description, the effective date of the assignment (typically the closing date), and the date of the underlying purchase and sale agreement. You should identify all leases being assigned by reviewing lease schedules, rent rolls, or the purchase agreement's exhibits to create a complete and accurate Exhibit A listing each lease with tenant names, suite numbers, lease commencement and expiration dates, current monthly rent amounts, and security deposit amounts.

Additionally, examine the purchase agreement to understand any specific provisions regarding lease assignments, tenant estoppel requirements, security deposit transfers, proration of rents, and allocation of pre-closing versus post-closing lease obligations. Verify the governing law jurisdiction specified in the purchase agreement to ensure consistency. If critical information is missing from the available documents, you should clearly identify what additional information is needed from the user before proceeding with the draft.

Document Structure and Drafting Requirements

The assignment agreement should follow a professional commercial real estate transaction format with clear, unambiguous language. The document header must include the full legal title "ASSIGNMENT AND ASSUMPTION OF LEASES," the execution date (formatted as "as of [Month] [Day], [Year]"), and complete identification of both parties with their legal entity types and principal addresses.

The recitals section should provide essential background context in three to four lettered paragraphs. Recital A establishes that the parties have entered into a purchase and sale agreement for the subject property, citing the specific date and including a brief legal description or address. Recital B confirms that Assignor is currently the landlord under certain leases affecting the property, with reference to the attached Exhibit A. Recital C states the parties' mutual intent to assign and assume all landlord rights and obligations under the leases as contemplated by the purchase agreement. Consider adding a fourth recital if there are material facts about tenant estoppels, lease modifications, or specific lease issues that should be acknowledged.

Operative Provisions

The assignment clause must comprehensively transfer all of Assignor's right, title, and interest in and to the leases, including but not limited to all rents (whether accrued or to accrue), security deposits, letters of credit, guaranties, tenant improvement allowances, lease options, renewal rights, expansion rights, and all other landlord rights and benefits under the leases. The language should be broad enough to encompass all lease-related rights while being specific about key economic components.

The assumption clause requires Assignee to expressly assume and agree to perform, observe, and be bound by all terms, covenants, conditions, and obligations of the landlord under the leases arising from and after the effective date of the assignment. This should include specific acknowledgment of the obligation to honor tenant security deposits, comply with tenant improvement obligations, and recognize any tenant rights or options that survive the transfer.

Indemnification and Risk Allocation

The indemnification provisions must clearly allocate risk between the parties based on temporal responsibility. Assignor's indemnification should cover and hold Assignee harmless from any and all claims, liabilities, damages, costs, and expenses (including reasonable attorneys' fees) arising from or relating to the landlord's obligations, breaches, or defaults under the leases occurring or accruing prior to the effective date of assignment. This should specifically address pre-closing rent arrearages, maintenance obligations, tenant disputes, and any landlord defaults.

Assignee's indemnification should mirror this structure but cover all claims and liabilities arising from or relating to the landlord's obligations under the leases from and after the effective date of assignment. Both indemnification clauses should survive the closing and continue indefinitely or for a specified period consistent with the purchase agreement. Include standard indemnification mechanics regarding notice, defense rights, and settlement approval.

Security Deposits and Economic Terms

Include a specific provision addressing the transfer of tenant security deposits. This should state that Assignor is transferring to Assignee all security deposits (and any accrued interest if required by law) held under the leases, with the specific total amount stated or referenced to a closing statement. Assignee should acknowledge receipt of these deposits and assume all liability for their return to tenants in accordance with the lease terms and applicable law, with Assignor being released from any further obligation regarding the deposits from and after the assignment date.

Address rent proration and allocation clearly, specifying that Assignor is entitled to all rents accruing prior to the effective date and Assignee is entitled to all rents accruing from and after the effective date, with any necessary prorations to be handled as specified in the purchase agreement or closing statement.

Relationship to Purchase Agreement and General Provisions

Include an express provision stating that this assignment is made pursuant to and subject to all terms and conditions of the purchase agreement, and in the event of any conflict between this assignment and the purchase agreement, the purchase agreement shall control. Reference any specific sections of the purchase agreement that govern lease assignments, tenant estoppels, or related matters.

The governing law provision should specify that the assignment shall be governed by and construed in accordance with the laws of the state where the property is located (or as otherwise specified in the purchase agreement), without regard to conflicts of law principles. Include standard provisions for successors and assigns, counterpart execution, entire agreement, amendment requirements (written and signed by both parties), and severability.

Execution and Exhibits

The signature block should provide for execution by authorized representatives of both Assignor and Assignee, with appropriate signature lines including the entity name, signatory name and title, and date. If the parties are entities, ensure the signature blocks reflect proper corporate, LLC, or partnership authority.

Exhibit A must be attached and should contain a comprehensive schedule of all leases being assigned, formatted as a table with columns for tenant name, premises/suite number, lease date, lease term (commencement and expiration), current base rent, security deposit amount, and any special notes regarding amendments, options, or material lease provisions. Ensure this exhibit is complete and accurate, as it defines the scope of the assignment.

Legal Considerations and Best Practices

Throughout the drafting process, maintain awareness of several critical legal considerations. Verify whether any leases contain provisions restricting assignment or requiring tenant consent, and ensure compliance with such provisions or confirm that the assignment qualifies for an exception (such as assignment in connection with property sale). Consider whether any leases have co-tenancy clauses, exclusive use provisions, or other terms that might be triggered by the ownership change.

Ensure consistency between this assignment document and related closing documents including the deed, bill of sale, closing statement, and any tenant estoppel certificates. The effective date of the assignment should align with the closing date of the property sale. If there are any problem leases (such as those with tenant defaults, ongoing disputes, or landlord cure obligations), consider whether special provisions or carve-outs are needed.

Review applicable state law regarding landlord-tenant relationships, security deposit requirements, and assignment of leases to ensure the document complies with all statutory requirements. Some jurisdictions have specific notice requirements to tenants upon assignment of their leases.

Output Format and Deliverable

Generate a complete, professionally formatted Assignment and Assumption of Leases agreement ready for attorney review and execution. The document should be in clean, standard commercial real estate transaction format with appropriate spacing, numbering, and organization. Use defined terms consistently throughout (capitalizing Assignor, Assignee, Leases, Property, Purchase Agreement, etc.). Ensure all cross-references are accurate and all blanks are either filled with extracted information or clearly marked for completion.

If any critical information cannot be determined from available documents, provide the draft with clearly marked placeholders in brackets (e.g., [INSERT SECURITY DEPOSIT AMOUNT]) and include a summary list of required information at the beginning of the document. The final product should be suitable for immediate use in a commercial real estate closing with minimal additional revision required.