Commercial sublease

Commercial Sublease Agreement

Rent out space you already lease to a subtenant, without getting out of your own lease. A commercial sublease lets you, the original tenant, sublet part or all of your commercial space while you stay responsible to your landlord under the master lease.

What is a commercial sublease?

A commercial sublease is an agreement where you, the original tenant (the sublandlord), rent out part or all of your leased commercial space to a subtenant, while your own lease with the landlord stays in force. You remain fully liable to the landlord for rent and every obligation in the master commercial lease. Almost every commercial lease requires the landlord's prior written consent to sublet, so the master lease, not state law, controls what you can do.

Key takeaways for the sublandlord

·        Get consent first: almost every commercial lease requires the landlord's prior written consent to sublet, and subletting without it can be a default.

·        You stay liable: a sublease does not release you. You remain responsible to the landlord for rent and all master-lease obligations.

·        Sublease, not assignment: a sublease transfers less than your full remaining term and keeps you in the chain; an assignment hands over your entire interest.

·        The master lease controls: the sublease must sit within the master lease's term, permitted use, and rules, and should attach it as an exhibit.

·        Term and rent: the sublease must end before your master lease does, and you set the sublease rent, though your lease may limit or capture any excess.

What a commercial sublease includes

·        Parties: you (the sublandlord) and the subtenant.

·        Subleased premises: the specific space, whole or part, being sublet.

·        Term: shorter than the master lease, ending at least a day before it does.

·        Rent and operating costs: the sublease rent and who pays CAM, utilities, and taxes.

·        Permitted use: within the use the master lease allows.

·        Incorporation of the master lease: attached as an exhibit and made binding on the subtenant.

·        Landlord consent: the sublease is conditioned on the landlord's written consent.

·        No greater rights: the subtenant gets no more than you hold under the master lease.

·        Insurance and indemnity: the coverage the subtenant must carry and who indemnifies whom.

·        Surrender: the condition the space must be returned in at the end of the term.

How to set up a commercial sublease

1.      Read your master lease. for the sublet clause, so you know whether consent is required and on what terms.

2.      Request the landlord's written consent. before you sign anything with a subtenant.

3.      Define the subleased premises and term. with the term ending before your master lease ends.

4.      Set the rent and operating costs. within what your lease allows, and say who pays CAM, utilities, and taxes.

5.      Attach the master lease. and make the sublease subject to it.

6.      Sign and keep the consent. the landlord's signed consent stays with the sublease.

How to write a commercial sublease

Start from your master lease, because it sets the outer limits of what you can grant. Confirm the sublet clause, then get the landlord's written consent to sublet in hand. Describe the subleased premises and a term that ends before your own lease, set the rent and who covers operating costs, and cap the subtenant's rights at your own.

Screen the subtenant first with a rental application. Incorporate the commercial lease by reference and attach it as an exhibit, and state that the sublease is subordinate to it, so if the master lease ends, the sublease ends too. For a residential sublet instead, use the residential sublease; for other agreements, start from the Rental & Lease hub.

Sublease vs. assignment: the distinction that matters

This is the choice that decides who stays on the hook. A sublease keeps you in the middle: the subtenant pays you, and you keep paying the landlord.

An assignment hands your whole interest to someone else, who then deals with the landlord directly. Pick the sublease when you want the space back later or are letting go of only part of it.