Jul 20, 2020

What to Know Before Subleasing Your Space

By Don Catalano

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What to Know Before Subleasing Your Space
If you find yourself in a situation where you have too much space than you need for your business, subleasing is an excellent option to consider. Subleasing is the renting of property by a tenant to another person (known as the sublessee) for a portion of the tenant's existing lease contract.

 

The process of subletting your office space can be very complicated, especially if your landlord makes it difficult. To sublease office space effectively, there are important things to know.

 

1. You Should Discuss with the Landlord First

Usually, it is essential to notify your landlord before you start subleasing. Having an in-depth conversation about the excess space before you start will make things go on smoothly.

 

If you have excellent and favorable terms, the landlord might even permit you to rent out your lease totally.

 

2. You Might Still be Paying Rent

If the rate of rent has reduced compared to when you started your lease, it might be hard for you to convince your subtenant to pay both the present rent and common area maintenance charges. Keep it in mind that you may end up paying part of the occupancy costs too.

 

3. Notify Your Neighbors

Let your neighbors know you are planning to sublease your office space to others. Perhaps, they may be interested in subleasing your space, which may be ideal for your business (depending on the nature of their business). In addition, subleasing to a co-tenant will allow you to get a subtenant quickly.

 

4. Choose Your Subtenant Wisely

It is essential to have a subtenant that you can trust in order to mitigate security concerns. Run a background check on the firm to ascertain their credit score and also get feedback from others who have worked with them. Always remember that you will be liable for any damages that happen in the office by the subtenant.

 

5. You May be Better Off Moving Out Completely

When you sublease a part of your office, take the time to carefully examine whether it would be an excellent option to move out fully and allow the subtenant to stay there permanently.

 

Ask yourself whether a new company would love to move into your extra space and examine whether your business would be affected by the subtenant.

6. Your Landlord Has Probably Imposed Some Restrictions

Most sublease clauses come with some restrictions, so it's essential that you carefully examine your lease thoroughly and get an attorney to interpret the agreement. Also, you may be expected to return any subleasing gains to the landlord or have restrictions on the kind of companies you can offer a sublease agreement to.

 

7. Subleasing is Not the Same as Assignment

Some lease agreements provide the option to sublease or delegate. People misuse these terms interchangeably, but they are two distinct terms. In a sublease, you are the tenant and also responsible for collecting rents and CAM from the subtenant. Assignments allow you to give over the proprietary rights under the lease to a new tenant.

 

Subleasing can be a difficult process, especially if you are doing it for the first time. It is advisable you engage the service of a tenant rep who have a solid understanding of the market.

 

Here are a few more articles we think you'll like:

COVID-19 & Retail Space

What to Know About Mixed-Use Space

8 Commercial Lease Terms That Give You Options

 

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Topics: subleasing

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Don Catalano

Don Catalano

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