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Connecticut Court Rules That a Substantial Modification of an Existing Lease is Neither a Sublease Nor an Assignment


The Connecticut Appellate Court recently came down with a ruling that has to be viewed as extremely favorable to Landlords who wish to exercise more discretion in accepting replacement tenants.

In Brennan Associates v. Obgyn Specialty Group, P.C., 127 Conn. App. 746 (2011), the Court held that the duty of good faith and fair dealing – which is generally imposed upon landlords whenever a tenant is seeking to assign or sublet an unexpired lease – will not apply in instances where the lease is being modified or extended beyond its original terms.

The Court held that any arrangement that substantially modifies the terms of an existing lease cannot be characterized as either an assignment or a sublease. Although the landlord is entitled to negotiate with a proposed replacement tenant in order to satisfy its mitigation obligations, it is not obligated by law to accept a replacement tenant which was produced by the tenant who is seeking to bail out of its lease with the landlord.

The Court re-emphasized the principle that a landlord has the ultimate right to “relet the premises to a tenant of its own choice at a rent greater than that which the proffered tenant was willing to pay.”

The Brennan Associates decision stands for the following proposition: In Connecticut, a Landlord would not be held to have unreasonably withheld its consent to a proposed assignment or sublease if the replacement tenant’s proposal for occupying the premises includes terms that are beyond the terms of the original lease. In that instance, because it would call for a totally new lease and thus cannot be characterized as either an assignment or a sublease, a landlord can refuse to accept the replacement tenant and still continue to hold the original tenant liable for the resulting breach of the lease