What is a Sublease Clause?
A Sublease Clause is defined as a portion of a commercial lease agreement that determines whether or not an existing tenant can sublease space to another tenant. This can include subleasing part of your space to another tenant, or leaving your space early and finding another tenant to take over the lease for the remainder of your term. The sublease tenant would pay the tenant the rent and any related operational costs outlined within the agreement, and the tenant pays the landlord.
Generally subleasing will occur under the following circumstances:
- A tenant leases space that is larger than what they need
- A tenant’s business activities have contracted or otherwise changed, resulting in a need to lower operational costs by allowing another tenant to sublease some portion of the space
- The business needs to move locations prior to the end of their lease agreement
Not all commercial lease agreements allow for subleasing in part or in whole. It is important for tenants to consider their long-term needs when looking for space and consider any future possible changes in lease space so they can negotiate a sublease clause into their agreement should this be required.
Commercial Sublease Agreements: Who’s Responsible for What
When subleasing a space, it does not mean the tenant is no longer responsible for the lease space. In fact, in most cases, the tenant is still responsible for paying the rent and the condition of the space, such as paying for operational costs and damages, and other lease obligations. It is a good idea to discuss a possible sublease with your landlord prior to subleasing your space to ensure they are aware of the situation in advance, and in some cases, the landlord may release you of some or all obligations. Like any agreement, be sure to get all sublease clauses and/or amendments in writing.
It is highly recommended that if you are considering including or adding a sublease clause to your lease agreement, you have an agent represent you. An agent can help you find the right subtenant, the appropriate rent for your requirements, investigate and take into consideration recent developments in the building and more, to help you determine the appropriate Asking Rate and expectations for subleasing.
They can also help answer the following and ensure it is addressed in your sublease clause:
- Can you sublease your premises for more or less than what you are currently paying?
- Are you able to recuperate any out-of-pocket expenses? (e.g. legal fees)
- Are there any restrictions on subleasing? (e.g. to an existing tenant in the same building, or to a tenant in another building owned by the same landlord?)
- Will there be any charges for subleasing your space by the landlord?
- Are you required to restore your premises at the end of your term?
Bedrock Realty Advisors Inc. has negotiated many successful sublease agreements on behalf of our tenants, ensuring the conditions of sublease are clear in case the need arises. Contact Us to find out how We can help with your commercial leasing, subleasing and lease renewal needs.
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