The second component is the Duty of Care. This requires the fiduciary to act with the competence and diligence that a reasonably prudent person would exercise in a similar situation. It is a standard of competence, not of perfection. A fiduciary is not liable for honest mistakes or for investments that perform poorly, provided they conducted thorough research and made a decision that was reasonable at the time. However, they can be held liable for making decisions that are reckless, grossly negligent, or made without proper diligence. For example, a trustee who invests a beneficiary’s entire inheritance in a single, highly speculative venture without any research would likely be found to have breached their duty of care.

Fiduciary relationships arise in many contexts. Corporate directors owe a fiduciary duty to their shareholders. Lawyers owe it to their clients. Trustees owe it to their beneficiaries, and agents owe it to their principals. The breach of this duty can have severe legal consequences, including financial liability for any losses incurred and the disgorgement of any profits the fiduciary improperly made. It is a legal concept designed to ensure that when one party places their trust and assets in the hands of another, that trust is honored with the highest possible degree of integrity.

An assignment, on the other hand, is a much cleaner and more complete transfer. When a tenant assigns their lease, they are transferring their entire interest in the lease to a new tenant, the assignee. The assignee steps directly into the shoes of the original tenant, signing a new agreement with the landlord and becoming directly responsible for all rent payments and other lease obligations. An assignment extinguishes the original tenant’s liability for the remainder of the lease term. For this reason, an assignment is almost always the preferable option for a tenant who is moving out permanently.

In both scenarios, the original lease agreement is the controlling document. Most leases contain a clause that requires the tenant to obtain the landlord’s prior written consent before they can either sublet or assign the lease. A landlord cannot typically withhold this consent unreasonably, but they do have the right to subject any potential new tenant to the same credit and background check process as the original tenant. A tenant who sublets or assigns their lease without the landlord’s permission is in material breach of their contract and could face eviction and financial penalties.