Legal Question in Landlord & Tenant Law in California

Hello,

I am a salon/studio owner leasing a space in a commercial property. There are two rooms in the space that I would like to use as booth rentals; week-to-week or month-to-month. The booth renters would have 24-hour access to their suites Tuesday - Saturday. I will be there on Sunday and Monday working in a room separate from theirs. My concern is that it would be a breach of contract based on my lease agreement. I've read and reread the terms of my lease in this area and cannot decipher what it all means and if there is a conflict.

Following the lease terms is a loose breakdown of law AB 5 which shows points of the law that pertain to salon owners.

Is it possible to get the layman's explanation and thoughts on the best plan of action?

Many thanks.

12. Assignment and Subletting.

12.1 Lessor's Consent Required.

(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any

part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent.

(b) Unless Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change in the control of Lessee shall constitute an

assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.

(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged

buyout or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the

Net Worth of Lessee by an amount greater than 25% of such Net Worth as was represented at the time of the execution of this Lease or at the time of the most

recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is

greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee

(excluding any guarantors) established under generally accepted accounting principles.

(d) An assignment or subleƫng without consent shall, at Lessor's opinion, be a Default curable after notice per Paragraph 13.1(d), or a noncurable Breach

without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subleƫng as a noncurable Breach, Lessor may either: (i)

terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach

and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to a similar adjustment to 110% of the price

previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled

adjusted rent.

(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

(f) Lessor may reasonably withhold consent to a proposed assignment or subletting if Lessee is in Default at the time consent is requested.

(g) Notwithstanding the foregoing, allowing a de minimis portion of the Premises, ie. 20 square feet or less, to be used by a third-party vendor in

connection with the installation of a vending machine or payphone shall not constitute a subletting.

12.2 Terms and Conditions Applicable to Assignment and Subletting.

(a) Regardless of Lessor's consent, no assignment or subletting shall : (i) be effective without the express written assumption by such assignee or

sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of

Rent or for the performance of any other obligations to be performed by Lessee.

(b) Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment.

Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to

exercise its remedies for Lessee's Default or Breach.

(c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.

(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the

performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or

entity responsible therefor to Lessor, or any security held by Lessor.

(e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the

financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required

modification of the Premises, if any, together with a fee of $500 as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor

with such other or additional information and/or documentation as may be reasonably requested. (See also Paragraph 36)

(f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession

of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation

herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with

provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

(g) Lessor's consent to any assignment or subleƫng shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease

unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of

the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply

same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect

said Rent. In the event that the amount collected by Lessor exceeds Lessee's then outstanding obligations any such excess shall be refunded to Lessee. Lessor shall

not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee

to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a

written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due

under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether

such Breach exists, notwithstanding any claim from Lessee to the contrary.

________ ________

________ ________

(b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the

obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be

liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

(c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of the Lessor.

(d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.

(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within

the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by

the sublessee.

10. Assignment & Subletting:

Notwithstanding any other language found elsewhere in this lease, if lessee requests lessor's

permission to a specific assignment or sublease, lessee must provide lessor with the following

information:

(i) the name and address of the proposed assignee or subtenant;

(ii) a copy of the proposed assignment or sublease;

(iii) reasonably satisfactory information about the nature, business and business history of the

proposed assignee or subtenant, and its proposed use of the premises, and

(iv) banking, financial and other credit information, and references about the proposed assignee or

subtenant sufficient to enable lessor to determine the financial responsibility and character of the

proposed assignee or subtenant.

Furthermore, without affecting any of its other obligations under this lease, lessee will pay lessor as

additional rent three quarters of any sum or sums or other economic consideration which (a) are

received by lessee as a result of an assignment or subletting, whether or not denominated rentals

under the assignment or sublease, and (b) exceed in total the sums which lessee is obligated to pay

lessor under this lease (prorated to reflect obligations allocable to that portion of the premises

subject to such assignment or sublease). The failure or inability of the assignee or subtenant to pay

lessee pursuant to the assignment or sublease will not relieve lessee from its obligations to lessor

under this paragraph. Lessee will not amend the assignment or sublease in such a way as to reduce

or delay payment of amounts which are provided in the assignment or sublease approved by lessor.

So to begin with, AB 5 requires any bona fide independent contractor to obtain their own, separate “business license, in addition to any required professional licenses or permits for the individual to practice in their profession.” In addition, the contracted individual must be able to show that they have “the ability to set or negotiate their own rates for the services performed”, “the individual has the ability to set the individual’s own hours”, “the individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work”, and “the individual customarily and regularly exercises discretion and independent judgment in the performance of the services.”

Beyond these general requirements for all independent contractors, AB 5 has specific elements that apply only to our industry, requiring each booth renter to show specific ways in which independence from the salon owner is further established.

In order to be a validly classified booth renter in California, that individual must set “their own rates”, process “their own payments”, and be “paid directly by clients.” Moreover, booth renters must set “their own hours of work and have sole discretion to decide the number of clients and which clients for whom they will provide services.” They also must have “their own book of business and schedules their own appointments”, maintain “their own business license for the services offered to clients,” and “if the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.”

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