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Anatomy of a Lease 25 ating and developing a public airport within the parameters of state and federal regulations and guidelines. 2.2.20 Assignments and Subletting The assignment of a lease is the process of transferring all rights and provisions of a lease from one tenant to another. A request for assignment may occur because one company is being acquired or sold by another, so the legal obligations need to transfer to the new legal entity. Another request may occur simply because the developer wants to divest of the liability and/or sell any equity interest in the facility. Subletting is the process of leasing part or all of the facility to another party without transferring any of the lessee's responsibilities to the airport sponsor. Assignment and subletting language is important in an airport lease, especially in circum- stances where permanent improvements need to be amortized over long periods of time to meet market pricing. The developer and/or the financier of the project will typically want some assur- ance from the airport sponsor that, if circumstances dictate, another tenant can replace the ini- tial tenant and/or subletting is allowed if the financial and/or business circumstances of the tenant change over time. The initial tenant may sign a lease that is sufficient in length to amortize investment in improvements, but many things can happen over the course of a 20- or 30-year lease. For the reasons just described, many airport leases include language that allows assignment, subletting, or both, within specific parameters. If improvements were made on airside property for the storage of aircraft, the allowable uses of the lease, including any assignment or subletting, should preclude nonaeronautical activity. Restrictions on use affect the market price of a facil- ity, so the developer and lender often look for flexibility in the lease that will allow assignment and/or subleasing in order to build confidence in the commercial viability of a project. At the minimum, the airport sponsor should consider assignment and subletting language that passes all obligations of the initial lease to any assignee or subtenant. The airport sponsor often requires pre-approval of any assignment or subletting, though approval should not be unduly or arbitrarily denied if the assignee and/or subtenant meets the spirit of the initial lease agreement. Some lease agreements include language that requires the initial tenant/developer to pay a percentage of any profit derived from an assignment or sublease, or a fee for the adminis- trative effort to consider and execute an assignment and/or a sublease. All of these aspects should be considered during the lease negotiation process and balanced with the overall objectives of the airport sponsor. 2.2.21 Regulatory Compliance The regulatory compliance section of a lease is a vitally important component of an airport lease agreement in that it assists the airport sponsor in keeping pace with a changing regulatory environment. The airport sponsor can and should require regulatory compliance with known applicable local, state, and federal regulations. In addition, the regulatory compliance section should pass along responsibility for complying with the inevitable additions and/or modifica- tions to existing regulations that will certainly occur over the course of decades. For example, an airport sponsor, as landowner, is responsible for complying with water qual- ity regulations of the Environmental Protection Agency. The airport sponsor should pass along water quality responsibilities to its tenants, within their respective leaseholds, for complying with these same regulations, requiring participation in the airport's storm water protection plan, and future compliance with any new regulations that may come over the course of the lease. Regulatory compliance requirements should be broad enough to encompass the many areas that affect the airport sponsor as owner of a public airport. Federal aviation and environmental